Stocks rallied today on positive news behind Greek’s debt restructuring, with a proposed plan where the banks would roll over half of the money received from Greek debt to new 30yr bonds. Ultimately, we are stuck in a range until we get this vote out of the way on Wednesday, as the headlines shift sentiment from day to day. The Dow Jones Industrial Average rose 108.98 points to 12,043.56, while The Standard & Poor’s 500 Index added 11.64 points to 1,280.09. Over the weekend, billionaire investor George Soros stated that it was probably inevitable that weaker economies will be allowed to exit the Euro.
We all know the problems evident in Greece, and we’re all well aware of the possible next shoe to drop, and unfortunately for Angela Merkel she could very well be the currencies undertaker. The massive liquidation evident in 2010 was also based upon Greek debt issues, so why are we now valuing the Euro 20% higher? Because they are ‘attempting’ to fix the problem? Any type of bailout typically takes anywhere from 6-18 months before realization, so maybe calling out the demise of the Euro might be premature, but these problems are not going away.
With QE2 ending in a few days, the massive liquidation in metals has been evident in light of the ‘safe-haven’ trade one would assume during a potential Euro crisis. The only logical conclusion one can draw is that both the risk trade and the safe-haven trade are off for the time being, money is coming off the table. The U.S. government on Monday reported that, when adjusted for inflation, consumer spending declined in May. It also revised April’s figures downward, illustrating the first drop since January 2010.
Today’s Important Economic Announcements (GMT)
8:30 AM GBP Current Account & Final GDP
9:00 AM GBP Inflation Report Hearings
1:00 PM USD S&P/CS Composite-20 HPI y/y
2:00 PM USD CB Consumer Confidence
4:00 PM USD FOMC Member Fisher Speaks
6:45 PM EUR ECB President Trichet Speaks
Forex & Commodities Technical Analysis
Crude Oil
Oil edged higher on Tuesday, moving back from four-month lows hit in the previous session. Crude rose 16 cents to $90.75, after a 55 cent decline took the contract to its lowest settlement level for four months in regular trading in New York on Monday. Worries about future demand for oil amid signs of softening economic growth, as well as oversupply concerns in the wake of an emergency release of oil from member countries of the International Energy Agency, have pressured oil prices in recent sessions. Leading into the 4th of July weekend, we will continue to hold our long position for a couple more days.
Stop Loss: 89.90
Take Profit: 91.90
GBP/USD
In the UK, the housing sector activity survey for June offered a disappointing look at a troubled market. The 0.1 percent drop for the month was the second consecutive monthly contraction; and the annual contraction (3.9 percent) was the largest since October of 2009. That said, this data carries little influence. The same can be said of the final reading on 1Q GDP figures due in the upcoming session; but watch current account. Regional investors are expecting a technical downturn for the pound this week after several reports showed the currency breaking out of a long-term bullish channel. We are bearish with caution.
Stop Loss: 1.6007
Take Profit: 1.5915
AUD/USD
Yesterday, we advised our traders to short sell this currency pair. Though Australian Prime Minister Gillard called her nation’s economy the envy of the world, speculators seem to be growing less enamoured with its prospects. According to interest rate forecasts, the benchmark rate is expected to be reduced 18 bps in a year’s time. This is not so far-fetched when we consider the country’s ties to China – who is itself attempting to fend off an asset collapse as lending troubles surface. Technically, the pair has been traveling south in the last few hours, and we expect it to continue on the path to 1.0400.
Stop Loss: 1.0476
Published by www.SolidityBrokers.com
