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By Gaurav Kashyap, Alpari ME DMCC
Traders bullish following Greek vote
With traders in a bullish mood following the vote passed by the Greek parliament for additional austerity measures worth EUR78bn, the upsides in EURUSD came as no surprise. The pair experienced a nice wave of fresh buying in the lead up the Greek parliamentary vote which all but confirmed the next loan tranche.
Earlier in the week, President Sarkozy went public with a proposed plan of rolling over Greek debt which many in the Eurozone periphery perceived to have much potential. A more detailed view of the plan indicated at perhaps more protection for the creditors of Greece as opposed to protecting Greece itself and to further puncture the sails of France's plan, ratings agency S&P announced Monday morning that the leading proposal would amount to a default under the ratings firm's criteria. The news saw risk appetite capped during Monday's trading session. Barring the nitty gritty of the proposal, the markets breathed a sigh of relief and saw the US Dollar weaken as risk appetite rallied over the past five days of trading.
US manufacturing data sees upside
With the Greece story on the back burner for the time being, attention will turn to the developing story of the staggering US economic recovery - one which took a positive turn during trading on Friday. Data from the US showed that manufacturing was on the uptick - ISM manufacturing for the month of June improved to 55.3 as compared to May's reading of 53.5.
With the worries across the Atlantic on hold for the time being, market participants will turn to several key economic releases which will confirm if the recent run of poor data from the US is in fact temporary. Headlining the week's data will be Friday's non-farm payroll reading which is expected to show more than 90K jobs were added during the month of June. Already expecting to show an improvement over May's reading (when only 54K jobs were added) a number in the range between 90K and 110K will see the strong gains in equity markets and higher yielding assets continue through the next week.
Along with Friday's job's data, Wednesday's ISM non-manufacturing reading & Tuesday's factory orders will help get a more accurate picture of the current state of the US economy. With Monday closed for Independence Day, we can expect US equity markets to inch lower on profit taking come Tuesday, following five straight days of gains where the S&P and Dow Jones gained 5.56% and 5.29% respectively. Traders will be eyeing Friday's number to determine the trend for the US dollar in the month ahead.
Crude contracts get trading boost
The crude contracts got a nice boost in trading last week as well, following a surge in risk appetite and an improving manufacturing number from the US. The WTI contract traded between 90 and 95 levels, finding strong support at 90.50 which also happens to be the 50 week moving average. The prospects for Crude this week will inevitably be tied to the performance of the US equity markets.
The contract faces stiff resistance at 96, which represents the bottom side of a rising channel. A break of this level can see the crude moving between 96 and 100 this week, whereas a bounce could see the contract normalize between 90-95. Fundamentally there's too much on tap this week and we should see a clear move either way.
Also on tap this week will the rate decisions from the Reserve Bank of Australia, ECB and BoE with the only change expected from the ECB, who are believed to be hiking rates to 1.50%. Watch for a move towards that May high of 1.4940 levels in the trading sessions ahead if the ECB's rate hike move materializes.
Staff
