AUD/USD: 0.7610EUR/USD: 1.0975The complete failure to arrive at any middle ground between Greece and the EU has seen the Greek PM abandon negotiations and call for a referendum on July 5 to consider the lenders’ terms for continuing the EU lifeline. Unfortunately for the Greeks, the current bailout finishes tomorrow and the EU have refused any extension until next week, leaving the real possibility of a Greek default and possible exit from the EU, which could have much larger ramifications further down the road. Monday's opening levels have the potential to show some large gaps, and conditions in early NZ/Australia will be extremely thin. Elsewhere over the weekend China cut its lending and deposit rates by 25 bps, with the 1 Year lending rate down to 4.85% and 1 Year deposit rate to 2 %. The coming week will be busy, with the main focus being on the US Unemployment/NFP, due Thursday, Friday being the 4 July US long weekend. Other key events to watch will be on the German/EU CPI and the global Manufacturing PMIs. Today kicks off a busy session, featuring the EU Economic Sentiment Indicator, Industrial Confidence, Services Sentiment, Business Climate, German HICP, US Pending Home Sales and the Dallas Fed Mfg Business Climate although all these will most likely be lost in noise coming from Brussels/Athens. Be very nimble
The Aud finished the week at 0.7655 after recovering from a low of 0.7630, with the weakness coming about on the back of Friday’s steep selloff in the Chinese equity markets, and not helped by soft iron ore/copper prices.
China cut its lending and deposit rates by 25 bps on Saturday, with the 1 Year lending rate down to 4.85% and 1 Year deposit rate to 2 %. This should ordinarily be supportive of the Aud, but aside from Greece, keep a close eye on the Chinese equity markets which suffered a steep selloff on Friday. If the rate cut fails to curb the move lower, the Aud could be in for quite a steep fall.
This week will be active with regards to data, with the highlights being the building approvals, trade balance & retails sales, and with the China PMIs also due. RBA Governor Glen Stevens will be speaking on Tuesday - and may at last get his wish for a lower Aud!
Selling Aud above 0.7600, if we see it seems to be the plan, although this is the bottom of the recent range. Further out, look for a run towards the trend low at 0.7532 and to 0.7500, the RBA's line in the sand, which will offer decent support at the first attempt.
Economic data highlights will include:
M:
T: HIA New Home Sales, Private Sector Credit, RBA Stevens Speech
W: AIG Manufacturing PMI, Building Permits, China Official, HSBC Manufacturing PMIs
T: Trade Balance
F: AIG Services PMI, Retail Sales, China Services PMI.
Jim LanglandsFX Charts www.fxchartsdaily.com
