All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

EU Market Outlook - EU Summit Provides

Last updated 6/29/2012 1:25 AM EST (GMT -5) 0 Comments - Add your comment

• Share this:

Andrew Taylor

Market Strategist, GFT

Follow @ATaylor_GFT

Top Headlines

o    EU Summit statements surprise markets with action plans

o    Agreement to directly recapitalize struggling banks

o    Time line to be implemented by 9 ^th July 2012

o    Market Moves:

·         Risk assets spike higher – EUR/USD to 1.2620, AUD/USD to 1.0170, GBP/USD to 1.5627

·         Spanish & Italian 10 year yields will be keenly watched

·         Gold and Copper see decent rises, WTI Oil a little subdued

The Asian session looked set for another day of wait and see with the only real clue to direction was Italy and Spain’s decline to sign off on the 130Bn Euro growth pact. This had traders writing off the day and just about the rest of the summit. However, hours later the markets were barraged with news alerts of statements from EU leaders that had obviously been negotiating well into the night.

Markets spiked higher on news that plans had been agreed upon and were in fact scheduled to take place in coming weeks. This saw some fresh strategies that on the surface may work to ease the barriers currently imposed in accessing funds for struggling economies. This should alleviate markets immediate concerns for stressed economies that put up their hands for help. The end result should also see a reduction in borrowing costs and hence a more stable platform from which to rebuild.

The main news that markets pushed higher on was an agreement to allow direct recapitalization of Euro Zone banks once a single bank supervisor is established, Spanish bank loans via ESM will not have senior credit status, Bailout funds will be available for struggling economies that are meeting the imposed conditions and the one thing that markets cheered for was a tight timeline to be implemented by 9 ^th July.

Although this had caught the markets a little of guard, the spike higher was a relatively minor move when you account for the market being considerable short at the time of release. Across all risk assets we have topped out decent resistance points and seeing some consolidation leading into the Europe session. As the markets digest the impact of what has been announced we can expect some support to appear near term as traders adjust their short positions due to a change in the outcomes of the so called ‘Non Event’.

Outlook

The final word will still remain with German Chancellor Angela Merkel as she shoots back to address Germany’s Parliament ahead of a vote on the ESM. Her public conviction will go a long way to confirming unity on the proposed plans.

All eyes will be on Spanish and Italian 10 year bond yields today to see if today’s announcements provide the affect that they were designed to achieve. Markets will see some resistance levels tested as we watch for further clues from the Summit.

Economic Events to watch:

0530 France                1Q GDP - detailed figures

0600 Germany            May Retail Trade

0645 France                May PPI

0645 France                May Household consumption expenditure in manufactured goods

0800 EU                       May Monetary developments in the euro area (M3)

0830 UK                       Apr UK monthly service sector figures

0900 EU                       Jun Flash Estimate euro area inflation

0930 UK                       Bank of England Financial Stability Report

For more intraday analysis and trade ideas, follow me on twitter @ATaylor_GFT

Register for my Live Weekly  Fundamental Outlook webinar

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Futures & Forex, Ltd. (“GFT Markets”) and FX360.com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of GFT Markets, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. GFT Markets and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Andrew Taylor's financial markets career started in 1991 in the interbank FX market,where he worked for one of the largest banks in Australia. Andrew then went on to trade on behalf of some of the biggest global banks, working across five of the world's major financial hubs: Sydney, New York, Singapore, Auckland, and Tokyo.

His more than 20 years of experience spans market borders and asset classes, covering global equities, commodities, options and futures. Andrew's wealth of trading experience and ability to communicate with traders of all levels has put him in demand as a first point of contact for clients and the media alike when seeking information and guidance.