Market Report Tuesday 21st of June

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We have some event risk over the next few sessions with the Greece no confident vote tonight at 23:59 CET and FOMC tomorrow. Overnight volatility in the Euro overnight options reflects this and trading around 18.5% for at the money option. The volatility for the 2 days options, which includes the FOMC is also trading around the same volatility levels for the at the money strikes. Headlines out of Greece continue to dominate the market sentiment and I found this article a bit interesting:
Each Eurozone Household Will Guarantee €1,450 Of Greek Debt By 2014:
http://www.zerohedge.com/article/each-eurozone-household-will-guarantee-%E2%82%AC1450-greek-debt-2014

Fitch out saying than any debt exchange or voluntary rollover of the Greek debt would be a default in their eyes. Fitch also said that US would be put on negative watch if US fail to raise the debt ceiling by August 2nd deadline.
Fitch sees risk of Greece, U.S. debt defaults - Reuter -
http://www.reuters.com/article/2011/06/21/us-fitch-usa-debt-idUSTRE75K0AP20110621?feedType=RSS&dlvrit=56943


The S&P 500 futures are trading higher in the pre-market, up 6.75 points at 1280.25, meaning we are above that gap at 1277.50 that I mentioned as my short term upside objective in the report the last few days. I still think the low from Thursday at 1252 should hold near term. We have falling resistance coming in at 1283 and then last week’s high at 1287 as reference points to the upside. To the downside the yesterday’s low at 1261.25 is a level that should not be broken if we are going to see more near term upside.

The Euro managed to break above the 1.4350 resistance level in thin Asia trading as stops were triggered up to 1.4370. I guess this reminds us that the US situation is also pretty horrible and the choppy price action continues. I think there are other more interesting markets to trade at the moment to be honest. We have the minutes out of Bank of England tomorrow at 10:30, which might be good to keep in mind if trading GBP today. Technically the key resistance at 1.6265 is the level on the upside to watch as any break above this level could see short squeeze.

Both Soybeans and Corn found support in the lower end of the trading range yesterday and I fancy a move higher. The market is awaiting the USDA acreage report on 30th of June, which is the most important release this time of the year. I expect to see a rather large move on the release.
Another thing I would like to mention is that Crude is in a seasonal strong month and both OPEC and DOE estimates point to solid demand going forward. So unless the financial markets fall apart over Greece I think we will be back above 100 USD per barrel fairly quickly.

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. Looks like we will open above this level today. Next key resistance is 1283 followed by 1287(last week’s high).
- 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. Looking for a move back below 0.9700.
- 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. Corn upside target is 730 and 1360 for Soybeans. Keep in mind that holding corn or soybeans over the USDA acreage report released at 30th of June could be very risky.

Today’s Calendar (CET):
- 14:50 EU Van Rompuy meets EU Juncker in Luxembourg
- 16:00 US Existing Homes Sales
- 19:00 IMF Lipsky speaks in Berlin
- 19:00 SNB Hildebrand speaks in Zurich
- 23:59 Confidence vote in Greece

RBA Weighs European Debt Crisis, Mining-Fueled Inflation in Holding Rates - BBG -
http://www.bloomberg.com/news/2011-06-21/rba-weighs-european-debt-crisis-mining-fueled-inflation-in-holding-rates.html

As Politicians Debate, Market Is Calling the Shots on Greece - The WSJ -
http://online.wsj.com/article/SB10001424052702304070104576397842101344616.html?mod=WSJASIA_newsreel_markets

IMF Not Negotiating New Greek Bailout: Lipsky- Bloomberg -
http://www.bloomberg.com/news/2011-06-20/lipsky-says-imf-not-negotiating-new-greek-bailout-as-it-weighs-aid-payment.html

Demand for financial services is recovering - The Times - by Anatole Kaletsky
http://www.thetimes.co.uk/tto/business/ceo-summit/article3068415.ece

Europe better have a Plan B to tackle Greek contagion - The Telegraph -
http://www.telegraph.co.uk/finance/financialcrisis/8585491/Europe-better-have-a-Plan-B-to-tackle-Greek-contagion.html

How much could Britain pay to bail-out Greece? - Telegraph -
http://www.telegraph.co.uk/finance/financialcrisis/8586852/How-much-could-Britain-pay-to-bail-out-Greece.html

Germany provides loan guarantees to prop up Greece - The Telegraph -
http://www.telegraph.co.uk/finance/economics/8587679/Germany-provides-loan-guarantees-to-prop-up-Greece.html

EU Links Greece Aid to Budget Cuts - The WSJ -
http://online.wsj.com/article/SB10001424052702303936704576397471366290148.html?mod=WSJEurope_hpp_LEFTTopStories


Foster's rejects $9.5b bid from SABMiller - The SMH -
http://www.smh.com.au/business/fosters-rejects-95b-bid-from-sabmiller-20110621-1gcg6.html#ixzz1PrdVMZxB


The IMF Warns Crisis Is Threat to Broad Upturn - The WSJ -
http://online.wsj.com/article/SB10001424052702303936704576397470527710588.html?mod=WSJEurope_hpp_LEFTTopStories

Delaying Tactics No Help in Greek Tragedy - The WSJ -
http://online.wsj.com/article/SB10001424052702303936704576397713297465414.html

How the Greek debt crisis could slam U.S. savers - The WSJ -
http://www.marketwatch.com/story/how-the-greek-debt-crisis-could-slam-us-savers-2011-06-20

Greece Will Default, But Not Yet - The WSJ -
http://blogs.wsj.com/source/2011/06/20/greece-will-default-but-not-yet/?mod=WSJBlog&mod=thesource

Political union cannot fix the euro - The FT -
http://www.ft.com/intl/cms/s/0/7944de54-9b69-11e0-bbc6-00144feabdc0.html#axzz1PliDoQ3j

Savour the sweet scent of Germany’s success - The FT -
http://www.ft.com/intl/cms/s/0/90a78066-9b8b-11e0-98f2-00144feabdc0.html#axzz1PliDoQ3j

Trades reveal China shift from dollar - The FT -
http://www.ft.com/intl/cms/s/0/2285148c-9b6c-11e0-bbc6-00144feabdc0.html#axzz1PliDoQ3j

Cool reception for Greek debt plan - The FT -
http://www.ft.com/intl/cms/s/0/b1ca2b84-9b65-11e0-bbc6-00144feabdc0.html#axzz1PliDoQ3j

Papandreou Faces Confidence Vote That May Decide Greece’s Fate - Bloomberg -
http://www.bloomberg.com/news/2011-06-20/papandreou-confidence-vote-looms-today-as-world-waits-for-delay-or-default.html

IMF Not Negotiating New Greek Bailout: Lipsky - Bloomberg -
http://www.bloomberg.com/news/2011-06-20/lipsky-says-imf-not-negotiating-new-greek-bailout-as-it-weighs-aid-payment.html

Cameron to Europe: not one penny more - The Times -
http://www.thetimes.co.uk/tto/business/ceo-summit/article3068867.ece


Technical’s and comments

Euro: The next level of key resistance is 1.4380 to 1.44, with last week’s high of 1.4496 as the big level to the upside for now. To the downside we have 1.4300, followed by 1.4250 and key support at 1.4150. This pair is very choppy and not my favorite market to trade at the moment. If I had to pick direction I would still look to sell rallies.
Cable: Key support at 1.6050 and resistance up at 1.6265. Still looks like a sell on rallies towards 1.6265.
USDJPY: Very tight range over the last sessions. 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: RBA signaled that they were in no hurry to raise rates, but still not that much downside action. Buying dips towards 1.0550 looks the most attractive for now.
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 and it looks like we will open above that 1277 level today. Next upside level is then falling resistance at 1283, followed by the key pinot level at 1287 (last week’s high). We have support at 1261.50 (Friday low) that I would not like to see it below, if we are going to rally.
Gold: Next interesting level to re buy is around the 1530 level. So, I am 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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