AUD at 0.7420, waiting on Greece decision

With no definitive decision yet from the negotiations in Brussels between Greece/EU the following levels are good at the time of writing but will change, possibly rather dramatically, as further headlines are published. In short, Eurozone Finance Ministers have demanded that Greece enact economic reforms within the next 72 hours in order for negotiations for a new bailout to begin and to keep alive Greece’s chances of staying in the Euro. Let’s hope that we do not have to endure another 3 days of this!! The Euro is opening the week lower, currently at 1.1100 (NY close 1.1162) having traded down to a 1.1035 low in early NZ. There is plenty of data due this week, but most of which will be marginalised by whatever happens in Greece. Today is fairly quiet from a data perspective, which is just as well, but with the highlights being the China Trade Balance and New Loans. The full report will be published later once the situation becomes clearer..

 

The Aud is slightly lower at Monday's opening trading at 0.7420.No major movement ahead of any possible announcement from Brussels.

 

The Aud climbed to 0.7495 on Friday, before running out of steam and headed lower once again. In ignoring the strong global equity rally, it fell heavily to finish at a 6 year weekly low at 0.7440 after having bounced off a session low of 0.7408.

 

The near term direction for the risk trade remains on the outcome of whatever Greece might bring us, but in the longer term there is heavy scepticism over the recent rally in Chinese equities, and with many stocks currently still suspended we could well see another selloff once they come back on tap as investors attempt to cut their positions. Overall the outcome for the Aud does look fairly bleak, not helped by the outlook for commodity prices although these did stabilise a little on Friday.

 

Technically, a downside break of 0.7400 would see a quick return to last week's 0.7372 low, which should provide some decent support. Beyond there though, there is a bit of a hole until the very strong support at around 0.7200, where two important Fibo levels are lining up (0.7210: 61.8% of 0.4773/1.1082 and 0.7180:76.4% of 0.6006/1.1082).

 

On the topside, a return to Friday’s high, and a break of 0.7500, would see a run towards 0.7525 (200HMA), 0.7555 (23.5% of 0.7848/0.7372) and then on towards 0.7600. A break of this would open the way to 0.7650, and possibly even on to 0.7700 in the event of a positive Greek deal. If seen I suspect t would be an excellent sell opportunity for the eventual continuation of the longer term downtrend.

 

Economic data highlights will include:

 

M: China Trade Balance, New Loans

 

T: NAB Business Conditions/Confidence (Jun), China Foreign Direct Investment

 

W: WBC Consumer Confidence, China GDP, Industrial Production, Retail Sales, Urban Investment, NBS Press Conference

 

T: Consumer Inflation Expectation, NAB Business Conditions/Confidence (qq)