Sentiment Improves as Second Bailout Loan is Disbursed in Greece; EUR/USD Tests 1.3290 Resistance

By Richard Cox
Richard Cox
Richard Cox
July 25, 2014 Updated: April 23, 2016

The Euro is trading on a firm footing on Tuesday after the meeting between European finance ministers came to an agreement do disburse the second bailout loan for Greece.  Part of the specifics included losses of 53.5 percent for private investors holding Greek bonds.  In addition to this, markets are expecting the release of positive macro data today out of the Eurozone, with consumer confidence figures scheduled for release and improvements showing in the consensus estimates.

In Australia, the RBA released the minutes from its last monetary policy meeting, which showed that the decision to leave interest rates on hold was a reached with a unanimous vote.  This decision was a surprise to most of the market, so the fact that the central bank was in total agreement is leading many analysts to revise their interest rate forecasts for the rest of this year.  This type of news, of course, is bullish for the regional currency and bearish for regional equity markets, and we did see rallies in the Australian Dollar after the report was made available.

In the UK, macro data is mostly second tier but we will see earnings reports from Dragon Oil, AMEC, Segro, and Croda International during the London session.  In Asia, stock markets were seen lower (even with the positive news of the Greek resolution in Europe).  In Japan, Mazda was one of the bigger laggards, as stories surfaced that the company is in need of raising additional investment capital (to the tune of 100 billion JPY).  Ryosan energy was also lower after downward revisions were made to its year end profit forecasts.  These stories helped send the Nikkei 225 lower, where it now trades at 9,465.

In the US, stock are trading mostly unchanged, with the S&P 500 futures showing a gain of 8.2 points.  Macro data in the region is scarce here as well, with only the Chicago PMI figures being released.  This number has the potential to create some short term volatility but the general trading tone today is more likely to be driven by headline sentiment and the optimism created by the Greek loan story.  Key earnings, however, will be seen from Wal-Mart, Home Depot, Kraft, and Chesapeake Energy.  Yesterday, markets were closed for holiday in the US, so expect some trading hangover to be a guiding factor as investors return back to their trading desks.

Technical Analysis:

Epoch Times Photo

The EUR/USD is trading firmer on the hourly charts but prices are starting to roll over after testing key resistance in the 1.3290 region.  This area marks critical historical levels as well as the 38.2% retracement of the decline from last November, so we are taking a contrarian bearish view unless we see a daily close above here.  Bear targets include 1.2960 initially and a break here will accelerate losses.

Epoch Times Photo

The FTSE 100 continues to pressure significant long term resistance in the 5930 area but prices are having a difficult time pushing higher and momentum indicators are beginning to show reversal signals.  Risk to reward clearly favors short positions in the longer term, with current levels seen as acceptable short entries.  First bear target comes in at 5800, which is a range low in addition to being a psychological level.