Unsurprisingly, equity markets are seeing a slow start to the week as holiday thinned trading volumes are keeping prices from making any drastic moves in early Monday trading. Following the relief rally seen in most asset classes into the close of last week, the main question traders will be asking is whether or not the upside is truly sustainable and there is a distinct possibility that a majority of the investment community might stay on the sidelines until the significant and most likely market moving data releases are seen toward the middle and end of this week.
The initial moves were upward (even if limited) as there were some encouraging headlines out of Greece, with the pro-bailout New Democracy party in Greece was seen gaining in the opinion polls for coming presidential election and it would appear that Greece is more interested in remaining part of the European Monetary Union than previously thought.
The New Democracy party is running on a platform of making significant decreases to the national budget and raising taxes, in line with the requirements that were set previously by the European Union in order for additional bailout loan funding to be disbursed. Without the election of the New Democracy party, it has begun to look less and less likely that Greece will be able to remain part of the EMU, as other political parties have pledged a platform of non compliance with the requirements that have been ordered by the Eurozone.
Looking ahead this week, we will see some very important macro data out of the US, which might be enough to distract market attention from Eurozone news headlines for the time being. Some of the larger reports include regional Fed surveys out of Dallas and Chicago, ADP Employment data, first quarter GDP and, finally, Friday’s Non Farm Payrolls and Unemployment Rate. Markets will need to see some encouraging figures in order to keep last week’s rally in stocks moving forward. Any significantly negative surprises will keep pressure on the Euro and global equities and bring buying activity back into the safe haven assets.
The AUD/USD is seeing a short term rally to start the week, as prices look to have found support in the previous demand level seen at 0.9660. The bounce here is not surprising given the previous strength of this level but now the bias turns to selling rallies rather than downside breaks. The first opportunity can be seen at 1.0120, which is the previous Fibonacci support and this will be viewed as an excellent sell zone if prices are able to rally this high.
Silver is coming into some very critical resistance levels, as prices are attempting to break out of an ascending triangle formation on the hourly charts. The key area to watch is the level seen at 28.90, and a break here will accelerate gains to a test of the psychological 30 level. To the downside, support is not seen until 27.90 so risk to reward ratios favor short positions at this stage of the game.