EURUSD, Daily
EURUSD found support at the lower end of my support range (1.1110 – 1.1140) yesterday and was moving sideways inside this range overnight. At the time of writing price is again at intraday support at 1.1100 after reacting higher from it earlier today. I have been expecting todays trading being limited between 1.1100 support and resistance at 1.1201 as market participants wait to see how the Greek drama develops but there seems to be no momentum from this support. Therefore the emphasis will be on watching the price action at current levels in order to see if buyers are stepping in or out of the way. Weekly picture suggests that EURUSD could be range bound between 1.0955 and 1.1466 for several weeks unless something extraordinary and unexpected happens. Significant daily support and resistance levels are at 1.1006 and 1.1292.
Greece defaulted on its IMF repayment yesterday and today Tsipras is prepared to to accept bailout conditions. Greeces latest letter to creditors says Greece is prepared to accept this Staff Level Agreement subject to the following amendments, additions or clarifications as part of the extension of the expiring EFSF program and the new ESM Loan Agreement�. The FT reports that the two page letter was sent as a clarification to yesterdays surprise ESM loan request. The Eurogroup will discuss it in a teleconference at 15.30GMT today. The mentioned amendments are reportedly are only a handful of minor changes. If confirmed, this will clearly help the ECB to extent ELA assistance for now and the referendum may be called off.
German Finance Minister Schaeuble is still taking tough line on Greece, saying the letter from Tsipras that accepted most of the bailout conditions lacks clarity and that Greeces proposals still aren't a basis for serious measures. The euro has given back most of the gains it saw following the earlier news of the Tsipras letter.
An IMF default would not have necessarily meant a cut off in ELA, which so far has only been frozen at last weeks level, as according to earlier Reuters reports citing an ECB official Greek banks could still have ruled to be solvent for up to 5 days after the non-payment to the IMF. However, without a bailout program in place and no clear hope of another one, Draghi would likely have faced growing resistance in the council with Weidmann already questioning previously if ongoing emergency assistance doesn't violate the prohibition of direct government financing through the ECB. This will still be the case, but if both sides are at least negotiating again, Draghi will unlikely want to be the one to pull the plug, at least for now.
Yesterday US consumer confidence surged to 101.4 in June from 94.6 in May (revised down from 95.4). It ties the March reading, and is the second highest print this year, bested only by the 103.8 in January. The latter was the highest since June 2007. The present situations component rose to 111.6 from 107.1 (revised from 108.1). The expectations index was 94.6 from 86.2 previously (revised from 86.9). The labor market differential improved to -4.3 versus -6.6. The 12-month inflation gauge edged uo to 5.1% from 5.0% (revised from 5.1%).
Feds Fischer said the FOMC will consider hiking rates in coming months, but didn't elaborate on the timing. The Fed VC, speaking on Monetary Policy in the US and in Developing Countries from Oxford University, added the the economy likely warrants only gradual moves and that the Fed is mindful of the risks of premature tightening. Growth should accelerate to about a 2.5% pace in Q2, and the pickup in the economy should further tighten the labor market. The dollar has been a significant headwind to growth. The Fed will monitor spillover effects in emerging markets.
Currency Pairs, Grouped Performance
At the time of writing there has been no strong movement in most of the pairs. CHF has lost some ground and NZD moved against other currencies after being weak yesterday. NZDJPY has moved against the prevailing trend and is now close to levels (83.50) it could sell off again (currently trading at 83.28). EURNZD is trading at intraday support but is close to a weekly resistance level at 1.6445. GBPNZD has also retraced to a support level at 2.3050 and is trading higher now. GBPCHF is trading close to 1.4795 resistance while AUDCHF is trading also near resistance and upper daily Bollinger Bands.
Significant support and resistance levels for NZD pairs are:
Main Macro Events Today
Chinas manufacturing PMI numbers came in short of expectations. The HSBC/Markit PMI slipped to a final 49.4 in June from the preliminary or flash 49.6 reading, but did manage to top the 49.2 seen in May. The official manufacturing PMI fell to 50.1 in June from 50.9 in May. The contractionary reading for the HSBC/Markit PMI and the erosion in the official PMI highlight the ongoing difficulties in Chinas economy. The Shanghai composite is hovering around unchanged.
UK Markit manufacturing PMI is expected to improve to 52.5 (median same) and the Swiss PMI to pick up to 49.9 from 49.7, although after Tuesdays KOF miss there has to be a risk to the downside and it seems the strong currency is having more of a negative impact than feared.
US Manufacturing ISM. The June ISM is out on Wednesday and should show an increase to 53.0 (median 53.1) from 52.8 in May. Other measures for the month have generally improved and we expect the ISM-adjusted average of all measures to climb to 53 for the month after holding at 51 in both May and April. It appears that producers have adjusted to the hit from falling oil prices over the winter and are once again feeling more confident.
U.S. Construction Spending. May construction data is out Wednesday and is expected to remain unchanged (median 0.3%) following a 2.2% bounce in April and a 0.5% clip in March. There is some downside risk that mixed housing data for May could weigh on the report.
Please note that times displayed based on local time zone and are from time of writing this report.