Are Policy Makers Preparing For Greece Exit?

Daily Forex Fundamentals | Written by AC-Markets | Jan 18 10 10:39 GMT |

News and Events: The start of another week brings with it a fresh spate of sovereign debt concerns, today sparked by an article in the UK's Telegraph that speculates the ECB is ruminating over the potential legal framework for the possibility of a country leaving the European monetary union. Whether the cited document (entitled: 'Withdrawal and expulsion from the EU and EMU: some reflections') has come about at the request of any genuinely influential entity is far from clear, but the headline and the message has clearly captured the attention of the financial markets this morning, and resonates with what many had been pondering as the Greece budget saga unfurled. Clearly, the major item lacking from such a news story is a credible source, and as such, these ruminations seem confined to the purely hypothetical. But the article does highlight the precarious plight of Portugal, Ireland, Greece and Spain (recently given the unflattering acronym 'PIGS'), and feeds the uncertainty about the fate of EURUSD in the face of possible EMU secession. EURUSD has traded heavily since last week's ECB meeting, after President Trichet explicitly stated that no country would be given 'special treatment' with regard to ECB collateral rules, and recent Greek debt auctions have struggled. Today's Eurogroup meeting is one of the only events on the economic schedule, but it is unlikely to result in a solution to the Greece problem, and as such, the negative sentiment weighing on EURUSD is likely to persist. Looking ahead to the rest of the week, we can expect a number of major releases, especially out of the UK; CPI on Tuesday is expected to climb 0.3% MoM, bringing annualized CPI up to 2.6% from last month's 1.9%, ILO Unemployment data is released on Wednesday (expected to hold steady at 7.9%), and there will also be the Minutes of the recent BoE meeting. It will also be an important week for USDCAD traders as the BoC is due to meet on Tuesday, and Canadian CPI released on Wednesday should affirm that inflation is normalizing. We feel there is significant potential for the central bank to shift to a more hawkish stance in the early part of 2010, and look for USDCAD to once again threaten parity Today Key Issues: 00:00 EUR Eurogroup meeting The Risk Today: EurUsd The break of 1.4457 support puts the focus on more significant support zone 1.4250 / 1.4280 (200D ma). A close below 1.4250 would reinstate a look at the downside targets 1.4000. Resistance should be capped at 1.4570/4625 GbpUsd GBPUSD has regained its upward momentum at the start of this week, pushing the 14 day RSI back up toward 61 levels. The pivotal 1.6250 level should provide decent support; and we continue to look for a test of 1.6400 levels in this rally. A break below 1.6250 would likely target 1.6060 before looking to 1.5833 lows. UsdJpy It still looks like we will remain range bound between the range lows of 90.73 and 92.50. After meeting good supply at the top of the two-and-a-half year downtrend, risks are skewed to the downside; recent breaks below 91.00 have seen some rounds of weak stops taken out, but good bids around 90.50 have prevented a full-blown rout, and plenty of levels on the downside should bring further buying interest ahead of 88.60 daily cloud support. UsdChf Lows keep playing with daily cloud support but strong move today should give the pair some bull direction. Tuesdays strong move through 1.0250 touched lows of 1.0131 late in the European session, just ahead of key retracement levels at 1.0115. 1.0350 now represents an area of good supply. EURUSD GBPUSD USDJPY USDCHF 1.4590 1.6500 92.70 1.0400 1.4520 1.6400 92.35 1.0350 1.4495 1.6380 91.40 1.0295 1.4385 1.6365 90.85 1.0255 1.4350 1.6250 90.25 1.0200 1.4300 1.6130 89.90 1.0115 1.4250 1.6060 89.10 1.0000 S: Strong, M: Minor, T: Trendline, K: Keylevel, P: Pivot ACM FOREX Disclaimer: This report has been prepared by AC Markets (thereof ACM) and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Salesperson or Traders of ACM at any given time. ACM is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.