Daily Report: Euro Lower as Greece Loan Decision Delayed

Euro weakens as the week starts as the approval for the next tranche of EUR 12b of the EUR 110b of Greece bailout fund was delayed till July. While the approval is still widely expected as Eurozone leaders just simply won't let Greece default, they'd now like to see passing of the austerity measures first. Luxembourg Prime Minister Jean-Claude Juncker "forcefully reminded the Greek government that by the end of this month they have to see to it that we are all convinced that all the commitments they made are fulfilled". The fund is needed by Greece to rollover maturing debts to September so as to buy time for getting the second bailout from EU.

Meanwhile Greece started a three-day parliamentary debate over a confidence vote tomorrow night, which Prime Minister George Papandreou called a "critical crossroads." Papandreous warned that the "consequences of a violent bankruptcy or exit from the euro would be immediately catastrophic for households, the banks and the country's credibility". The confidence vote will be a defining test on whether Papandreou would be able to deliver the fiscal reforms sought by Europe and the IMF in return for rescue aid.

Nevertheless, one positive out of the EU finance ministers meeting was that they backed the development of a second bailout for Greece and said that they "welcome the pursuit of voluntary private sector involvement in the form of informal and voluntary roll-overs of existing Greek debt at maturity for a substantial reduction of the required year-by-year funding within the programme, while avoiding a selective default for Greece."

Elsewhere, dollar is generally firm today with support from weakness in crude oil. The break of 94.63 support in crude oil last week confirmed resumption of recent decline and should be heading towards 90 psychological level. CRB commodity index should also break 332 support today, providing support to the greenback.

Dollar index drew some support from 61.8% retracement of 74.22 to 76.10 at 74.90 and recovered. But as noted before, the index faced strong resistance from medium term falling trend line and near term outlook is a bit mixed for the moment. We'll stay neutral until a break of either 76.10 resistance or 74.89 support.

EUR/JPY Daily Outlook

Daily Pivots: (S1) 113.87; (P) 114.33; (R1) 114.95; 

Intraday bias in EUR/JPY remains neutral for the moment and some more sideway trading could be seen. Though, as noted before, recent development suggests that decline from 123.31 is resuming. We'd expect upside of recovery to be limited below 116.69 resistance and finally bring downside breakout. Below 113.41 will confirm resumption of whole fall from 123.31 and should then target 61.8% projection of 121.83 to 113.41 from 117.88 at 112.67 next.

In the bigger picture, the main question is whether EUR/JPY's down trend from 2008 high of 169.96 has completed at 105.42. Downside momentum has been diminishing for some time with bullish convergence condition in weekly MACD. However, the choppy look of the rebound from 105.42 argues that it's corrective in nature. Hence, another low below 105.42 is still more likely then not. Nevertheless, even in case of another fall, we'd start to look for reversal signal again around 100 psychological level unless weekly MACD would break it's up trend line. On the upside, break of 123.31 resistance should now confirm medium term reversal and should target 139.21 key resistance.

Economic Indicators Update

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
	EUR	Meeting of the Eurozone Finance Ministers
22:45	NZD	Manufacturing Activity Q1	2.90%		3.10%	3.00%
23:01	GBP	Rightmove House Prices M/M Jun	0.60%		1.30%
23:50	JPY	Trade Balance Total (JPY) May	-0.47T	-0.54T	-0.50T	-0.47T
6:00	EUR	German PPI M/M May		0.10%	1.00%
6:00	EUR	German PPI Y/Y May		6.30%	6.40%
8:00	EUR	Eurozone Current Account (EUR) Apr		-4.8B	-4.7B