Greece asks for bailout vote beyond June

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Fundamental outlook  

US housing demand showed recovery through better annualised increments. Job claims remained steady while consumer sentiment rose.

Attention has been staked in Greece on debt repayment before end June while Prime Minister Alexis Tsipras has called for another delay on votes to July 5. Market investors are taking the Greek outcome as market benchmark for next week’s trend.

US existing home sales increased 5.1 per cent to an annual rate of 5.35 million units in May, the highest level since November 2009.

In another report, new home sales rose 2.2 per cent  to a seasonally adjusted annual rate of 546,000 units, the highest level since February 2008.

US core capital goods order rose 0.5 per cent in May after it was revised at 0.2 per cent contraction in April, signaling business spending has increased on the back of a stabilising economy.

National economy contracted slightly in the first quarter (1Q) as it struggled with bad weather and a strong dollar. Gross domestic product fell at 0.2 per cent annual rate in 1Q ended March, from the previous estimate of 0.7 per cent contraction.

US claims for job benefits rose 3,000 to a seasonally adjusted 271,000 for the week ended June 20, rising moderately in tight market. Separately, the manufacturing index filed by Markit declined to 53.4 in June from final reading of 54 in May.

US household spending increased 0.9 per cent last month, the biggest gain since August 2009, after an upwardly revised 0.1 per cent rise in April.

The University of Michigan’s consumer sentiment was also revised higher at 96.1 in June after it rose to 90.7 in May.

Markit reported that manufacturing index in Japan grew to 49.9 in June, lower than previous month’s 50.9. In a separate report, monthly core consumer price index rose 0.1 per cent on yearly basis in May, down from a 0.3 per cent rise in April.

Japan’s unemployment rate was steady at 3.3 per cent in May. Household expenditures rose 4.8 per cent on an annual basis which was better than forecast for the first time, since the consumption tax started in April of 2014.

Markit reported that for the first time in three months, German manufacturing index rose to 51.9 in June. German Ifo business climate grew to 107.4 in June, which was slightly lower than 108.5 in May.

After four meetings held last week with Greece, European creditors failed to reach an agreement on economic reform deal for its debt repayment.

German’s Merkel says it is impossible to find fresh fund for Greece from current bailout package. On Friday, Greek Prime Minister Tsipras called for a vote of bailout proposals on July 5.

 

Technical forecast  

US dollar/Japanese yen trading has been strong and it has moved back to 124 regions. The strong dollar is partially the reason for the better market sentiment seen last week, despite Greece’s financial rout.

This week, we remain conservative on predicting the range to trade from 122.5 to 124.5 areas. However, observe Greece’s resolution outcome that might push the price trend beyond this range.

Euro/US dollar has fallen from 1.145 highs to the current 1.115 levels after confidence in Greece’s repayment waned. This week, market will continue to be alert on the issue in Greece and it will probably move from 1.105 to 1.13 ranges.

The resolution of Greece’s debt after July 5 will be the deciding factor to euro’s strength in attracting or pushing away investors.

British pound/US dollar fell off 1.59 tops to the current 1.57 levels for the weekend closing. This week, we reckoned that the trend will continue to slide to 1.555 areas before bargain-hunting comes in.

Resistance will emerge at 1.58 levels in case of technical recovery. Dollar’s strength will play an essential part in moving against the pound in the coming weeks.

 

Disclaimer: This article was written for general information only. No liability by the writer or newspapers. Dar Wong is a registered fund manager in Singapore with 26 years of trading experience in global Derivatives & FX markets. He can be reached at  [email protected].