Risk Sentiment Lower as Greek Bank Withdrawals Hit Extreme Levels; EUR/USD Targets 1.2580

Risk sentiment was broadly lower overnight after a story in the Wall Street Journal showed that withdrawals from private banks in Greece totaled 700 million Euros on Monday, which indicators a severe lack of confidence in the country’s financial system. The result was another bull move in the US Dollar, and, to a lesser extent, Gold. Equity markets in the US are moving in and out of negative territory and today’s main macro release will be the monthly Housing Starts and Industrial Production figures, which are both expected to rise.

The major stories in equity markets came from JC Penny and Arena Pharmaceuticals, which posted losses of 13 and 8 percent, respectively, after disappointing earnings releases. General Motors was one of the big gainers on the day, however, after Berkshire Hathaway disclosed a recent purchase in the company’s stock. The S&P 500 futures are trading 0.1 percent lower, apparently shrugging off wider concerns that Greece might be forced to leave the European Monetary Union.

At the moment, markets are starting to accept the possibility that Greece will need to hold another election in June, as the current leadership is unable to establish a majority government despite numerous meetings with party leaders. The legal deadline for new elections is a maximum of four weeks, which would mean that the process can only be delayed until the 17th of June. Given the lack of expected resolution and the fact that there is little to be seen in the way of new headlines over the coming sessions, all markets will have for guidance is a set of economic figures out of the US and Canada.

Housing Starts in the US likely rose from their lowest levels in 5 months in April, as the real estate market stabilizes and home builders saw pickups in activity. According to analyst forecasts, Housing Starts rose by 4.7 percent for the month to an annual rate of 685,000. Industrial Production figures will also be released, along with the minutes from the latest monetary policy meeting from the Federal Reserve.

In Canada, we will see consumer inflation numbers, with the monthly CPI data expected to show a rise of 0.1 percent, from the 0.4 percent increase that was seen in March. With the Fed meeting minutes, the overall bias is likely to focus on recent economic data, and if this is the case, it will likely bring another wave of buying back into the US Dollar, as this would be an implicit suggestion that another round of QE stimulus drifts farther from the realm of possibility.

Technical Analysis:

The downtrend in the EUR/USD is well known at this point, so we will pull out to the weekly charts to get a sense of where prices might be heading longer term. As prices are caught in a daily downward channel, we can see that prices are currently coming into some major trend line support that helps define the weekly symmetrical triangle on the weekly charts. A weekly close below the triangle suggests a test of 1.2580 first, before shorter term bounces are seen.

The S&P 500 continues to push lower, and prices have now broken critical support in the 1340 region. A weekly close here will target Fibonacci levels seen at 1280, as this is also where significant moving averages will also be clustered.