Daily Report: Sentiments Reversed on Greek Austerity Deal, Euro Rebounded

Risk sentiments staged a drastic turn overnight while Euro rebounded strongly on news that Greece agreed with a team of EU/IMF on the new five-year austerity plan for securing the bailout fund. The measures, which will complete a EUR 78b austerity package, will now faces a parliamentary vote next week on June. EU finance ministers would then approve on July 3 the next payment of the bailout. That should help Greece cover around EUR 4b of maturing debts between July 14 and 22 and another EUR 3b of coupon payments within the month. Then on August, Greece will need to redeem EUR 6.6b of bonds. Greek Prime Ministers Papandreou pledged that there will be a "strong commitment" from Greece. DOW reversed earlier losses to 11874 and closed just -59pts lower, at 12050. Asian equities followed and were broadly higher. Euro managed to rebound strongly against dollar and swissy too.

DOW's strong rebound yesterday does suggest near term stabilization in market sentiments. But outlook remains bearish considering that it's still staying well below the falling 55 days EMA. Apparently, DOW has completed a five wave sequence from 9614 to 12876 and the correction from 12876 is still in favor to extend through 38.2% retracement at 11639, and possibly through 11555 support. We'll stay bearish in stocks as long as 55 days EMA (now at 12251) holds. And in case of another fall, the greenback would be boosted higher on risk aversion.

Outlook in the dollar index remains unchanged. It's still struggling to take out medium term falling trend line from 88.70 decisively. This is no clear indication of trend reversal yet even though bullish convergence condition is clearly seen in daily MACD. We'd prefer to see decisive break of 76.36 key resistance to fully turn bullish in the index or we'll stay neutral first. 

On the data front, Japan corporate services price index dropped -0.9% yoy in May. German Ifo business climate will be a main feature in European session and is expected to drop to 113.4 in June, but it would probably disappoint by having a deeper fall. From US, durable goods orders and finalized reading of Q1 GDP will be featured.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.5936; (P) 1.6005; (R1) 1.6072;

Intraday bias in GBP/USD remains on the downside with 1.6067 minor resistance and further decline is still expected. Decisive break of 1.5935 support will have medium term bearish implication and should target 100% projection of 1.6746 to 1.6058 from 1.6546 at 1.5858 first. On the upside, above 1.6067 minor resistance will turn bias neutral and bring consolidations. But near term outlook will remain bearish as long as 1.6262 resistance holds.

In the bigger picture, price actions from 1.3503 (2009 low) are treated as consolidation to long term down trend from 2007 high of 2.1161. Rise from 1.4229 is treated as the third leg of such consolidation and with 1.5935 support intact, such rise could still continue for 1.7043 resistance. But after all, strong resistance should be seen between 1.7043 and 50% retracement of 2.1161 to 1.3503 at 1.7332 to limit upside. On the downside, below 1.5935 support will indicate that rise from 1.4229 is completed and further break of 1.5344 will confirm this case and target 1.3503/4229 support zone.

Economic Indicators Update

 

GMT	Ccy	Events	Actual	Consensus	Previous	Revised
23:50	JPY	Corporate Service Price Y/Y May	-0.90%	-0.80%	-0.80%	-0.70%
8:00	EUR	German IFO - Business Climate Jun		113.4	114.2
8:00	EUR	German IFO - Expectations Jun		106.3	107.4
8:00	EUR	German IFO - Current Assessment Jun		120.8	121.4
12:30	USD	Durable Goods Orders May		1.60%	-3.60%
12:30	USD	Durables Ex Transportation May		1.00%	-1.50%
12:30	USD	GDP (Annualized) Q1 F		1.90%	1.80%
12:30	USD	GDP Price Index Q1 F		1.90%	1.90%