Market Report Monday 20th of June

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The market continues to be dominated by news headlines and specifically Greece is the major focal point. I have argued for some time that we will likely see a default within Europe, structured or an outright collapse over the next few years. In my view a restructuring of the debt would also be a default technically, because it would mean that Greece cannot pay the obligations. Seems like the ECB and Euro zone is obsessed with saving Greece. Given that Greece is a small player in Euro zone, it looks a bit overdone in my view. It would probably been much healthier for the long run if Greece had been allowed to default last year. I just don’t see how Greece is going to have any chance to repay the debt they are accumulating at the moment. The Greek debt issues looks to drag out for quite some time and keep any eye on any headlines out on the matter throughout the week. The big issue seems like that Greece much find domestic support and unite behind the required spending cuts. So a bit part of the solution lies in the Greek political arena. We have a no confidence vote this week (midnight Tuesday) and budget vote next week. Those are key events.
We have the FOMC decision on Wednesday, which will be a very important event and will give us more clues about the thinking with regards to stimulus and more.
S&P 500 futures traded to a low at 1252 last week (Thursday) and that low has since held. Short term I am looking for a bounce to fill the gap at 1277.50. The overall sentiment seems like selling rallies and the market looks short, maybe a short squeeze is on the cards?

The Euro rally Friday looks a bit overdone to be honest and I think the sell on rallies strategy will work today as well. We have key support down at 1.4150 that I don’t expect to be broken. A break above 1.4350 sees the risk of a short squeeze. The Bank of England minutes is also out this week, which is a major event risk for the GBP this week.
The market has price out any rate hikes for the AUD this year and this has sent the AUD lower last week. Seems like AUD will be driven by risk appetite solely going forward and we have the RBA minutes overnight that is a significant market risk. We also have news out of Russia that the Russian Central Bank will buy AUD, see news story below.

Looking at a few interesting points in the markets trading wise:
- Thursday’s low in the S&P futures at 1252 should hold near term and I look for a move to close the gap at 1277.50
- Crude is a buy on dips above 91.50 I reckon for a move back towards 95.50
- USDCAD is approaching the upper end of the recent range and looks like a sell towards 0.9850
- Silver trading sideways over the last month, range 32.75 to 38.76.
- Gold is a buy towards 1530 today.
- Corn and Soybeans are at the lower end of the recent range. Looking for a move higher in both markets this week.

Today’s Calendar (CET):
- 16.30 Trichet speaks
- 17.30 ECB's Weidmann speaks
- 18.00 ECB's Stark speaks
- 19.50 US treas. sec Geithner speaks
- 03.30 AUD RBA minutes

US budget talks hit tense stage - The FT -
http://www.ft.com/intl/cms/s/0/ce497392-9a9c-11e0-bab2-00144feab49a.html#axzz1PliDoQ3j

Russians chase the Aussie dollar as its central bank secures 1pc of reserves - The Australian -
http://www.theaustralian.com.au/business/russians-chase-the-aussie-dollar-as-its-central-bank-secures-1pc-of-reserves/story-e6frg8zx-1226078107256

Japan’s Exports Declined More Than Expected - Bloomberg -
http://www.bloomberg.com/news/2011-06-20/japan-s-exports-declined-more-than-expected.html

Eurozone recession warning after Greece deal - The Independent -
http://www.independent.co.uk/news/business/news/eurozone-recession-warning-after-greece-deal-2300027.html

For Treasury Bulls, It's All Good - The WSJ -
http://online.wsj.com/article/SB10001424052702304887904576395671059760848.html?mod=WSJEUROPE_hps_sections_markets

Merkel faces backlash over Greek deal - The FT -
http://www.ft.com/intl/cms/s/0/1c68c2d2-9a91-11e0-bab2-00144feab49a,s01=1.html#axzz1PliDoQ3j

IMF warns US, eurozone deficits a threat to stability - The Telegraph _
http://www.telegraph.co.uk/finance/economics/8583008/IMF-warns-US-eurozone-deficits-a-threat-to-stability.html

Eurozone delay over Greek rescue risks spooking markets - The Telegraph -
http://www.telegraph.co.uk/finance/financialcrisis/8585706/Eurozone-delay-over-Greek-rescue-risks-spooking-markets.html

UK banks abandon eurozone over Greek default fears - The Telegraph - (out on Saturday )
http://www.telegraph.co.uk/finance/financialcrisis/8584442/UK-banks-abandon-eurozone-over-Greek-default-fears.html

EU Ministers Move to Clear Greek Payout - The WSJ -
http://online.wsj.com/article/SB10001424052702303936704576395314159080624.html?mod=WSJEurope_hpp_LEFTTopStories

How the Euro Keeps Bears Behind Bars - The WSJ -
http://online.wsj.com/article/SB10001424052702304453304576392171770552648.html?mod=WSJEUROPE_hps_sections_markets

Spanish Marchers Protest Unemployment, Austerity - The WSJ -
http://online.wsj.com/article/SB10001424052702303936704576395592854247606.html

Against the odds, the euro will scrape through - The FT - By Wolfgang Münchau
http://www.ft.com/intl/cms/s/0/14845d90-9a66-11e0-bab2-00144feab49a.html#axzz1PliDoQ3j

Talks near deal on €12bn aid to Greece - The FT -
http://www.ft.com/intl/cms/s/0/0a8d87be-9a9b-11e0-bab2-00144feab49a.html#axzz1PliDoQ3j

Boris Johnson: let Greece go bankrupt and leave the euro - The Telegraph -
http://www.telegraph.co.uk/news/worldnews/europe/eu/8585704/Boris-Johnson-let-Greece-go-bankrupt-and-leave-the-euro.html

Europe May Withhold Half of Greek Payment - Bloomberg -
http://www.bloomberg.com/news/2011-06-19/europe-may-withhold-half-of-greek-payment.html

Russia to Lower U.S. Debt Holdings - WSJ -
http://online.wsj.com/article/SB10001424052702303310004576393651050458930.html?mod=WSJEUROPE_hps_MIDDLESixthNews


Technical’s and comments

Euro: I see resistance at 1.430 and 1.4350 today and I am looking to sell towards that level. Key support at 1.4150 for now.
Cable: Key support at 1.6050 and resistance up at 1.6250. Still looks like a sell on rallies.
USDJPY: I remain longer term bearish on the JPY as the fundamental factors in Japan looks ugly, with huge public debt and unfavorable demographics going forward. However the risk off over the last days has taken us below 80 again. Not sure if we see any intervention unless the move picks up in speed and magnitude. Buy on dips for the brave.
Swissy: I expect the CHF to underperform Euro as the 1.20 EURCHF looks very rich in CHF terms. So maybe better to play Euro is negative on USD. Swissy is bearish below 0.8500 for now, looking for 0.8300
AUDUSD: Buying dips towards 1.0550 looks the most attractive for now. But keep in mind that we have RBA overnight, risk event.
USDCAD: Still favor selling rallies for a move back below 0.9700. If we break above 0.9900 this view would be wrong I reckon.
S&P Future (ES): Expect the low from Thursday last week at 1252 to hold and a move to close the gap at 1277.50 near term. See resistance at 1275 (Friday high) and support at 1261.50 (Friday low). Seems like market is pretty short, so short squeeze could be triggered if we get above 1278 I reckon.
Gold: Next interesting level to re buy is around the 1530 level. So waiting for lower level to get involved.
Crude oil: Buy on dips above 91.50 I reckon for now and looking for a rally towards the resistance at 95.50.
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