The first session of the week was quite volatile and we saw interesting price action in most money markets even though we had a very light economic calendar. However we had progress in the Greek debt issue after a new proposal from the Greek side that the EU has found “promising” and was considered as a positive step forward.
What is interesting though is the response from the Euro that was quite volatile throughout the day and overnight turned lower. Is that a sign that investors that have backed the Single currency while there was a stalemate between the two sides consider a deal as a bearish development? We think it remains to be seen. At the same time the European stock markets responded to the news in a positive manner climbing higher while Gold was under pressure from the US Dollar.
Taking a more detailed look in the major currencies’ outlook, the Euro rejected the 1.1400 resistance once more yesterday even though we’ve seen some progress from the Greek debt negotiations and the currency actually broke below the 1.1300 support area overnight.
This could be a pre-emptive reaction to the European PMI reports scheduled for release today, even though the numbers are expected to print in a steady manner. If the Euro remains firmly below the 1.1300 level then the next stop will be the 1.1200 support floor.
The Cable was also in the backseat yesterday and overnight the UK currency also dropped below the key 1.5800 support level. There was no news to drive the Pound lower so we could assume that the move is driven by Dollar flows ahead of the Durable Goods report later today, a factor that could also be part of Euro’s decline as well.
For the Cable the key pivot level is the 1.5800 figure, if the currency remains below that today then we expect the pressures to drive the pair lower. Next stop would be the 1.5700 area of support and as long we have no news out of the UK to support the domestic currency we could see some pullback after 10 days of gains in a row.
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