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.

Greece Steals Spotlight...Again

Last updated 10/15/2012 11:09 AM EST (GMT -5) 0 Comments - Add your comment

• Share this:

Neal Gilbert

Technical Analyst, GFT

Follow @FXexaminer

The Dirt

North American traders woke up this morning to a market that was much stronger than they left it on Friday. Weekend developments out of China, Australia, and Europe have changed the mood of investors to feel a bit better about global developments. However, those warm and fuzzy feelings have been upended by a report that Greece and the Troika will not be able to hash out an agreement with Greece’s creditors before the European Union Leader’s summit this week, and an emergency Eurogroup meeting is the most likely outcome.

In China, imports and exports both increased from the previous reading signaling that reports of the death of the Chinese growth story was highly exaggerated. In addition, Chinese inflationary figures were in line with expectations. The market didn’t respond positively at the start of Asian trade, but it has rebounded furiously since then and challenged high marks posted on Friday in many markets.

Australian data was also stronger showing that Home Loans and Vehicle Sales increased over their previous readings. While the AUD/USD hasn’t responded quite as vociferously as other currencies like the EUR/USD, it did have a bounce up which could be encouraging levels for sellers ahead of this evenings Reserve Bank of Australia meeting minutes that are expected to be very dovish.

In the US, Retail Sales blew away estimates on all fronts, and the previous month’s results were also revised upwards to show that the US consumer is back with a vengeance. The sales figures have lined up with consumer confidence reports that have all been trending positively over the past few months. Normally this would create a big market rally, however, today’s price action is pricing in something else altogether.

The big news of the day has been comments from Greek Finance Minister Giannis Stournaras that, "It is difficult to reach an agreement by the EU Summit,” and "There is still the issue of the debt sustainability and the financing gap. All show that we are heading towards an emergency Eurogroup meeting.”

Greece is once again coming to the forefront of headlines as they continue to try and determine how they should fix their spending imbalances. Greece has been the killer of rallies in markets countless times over the last few years, and today is no different. In fact, the extraordinarily positive report of US Retail Sales has been overshadowed by the Greek reports.

So here’s the dirt: Despite the “risk on” report of US Retail Sales beating estimates, neither equities nor risk currencies are reacting very positively. The situation in Greece will only encourage more selling, and the expected dovish sentiment from the RBA probably won’t change that sentiment this evening. Therefore, more downward price action may be the theme of the day as investors prepare for worst case scenarios moving forward.

The Data

The most striking data this morning was the US Retail Sales report which beat estimates on all fronts. While the market was expecting a positive result with consensus around 0.8%, the 1.1% result was very positive. In addition, the previous month’s results were revised up to 1.2% from 0.9%. This was the first time since October/November of 2009 that there have been two months in a row of 1% gain or more.

Even the Retail Sales excluding Autos broke the 1% barrier by showing a 1.1% increase, and the previous number revised up to 1.0%. Not all was positive though as NY Empire State Manufacturing Index continued to be in contractionary state by printing at -6.16. Considering the previous report at -10.41, today’s result could be an indication of improving conditions in the manufacturing sector.

The Decision

While the overall mood appears to be down this morning, the extreme drop could be a little overdone. Besides, a retracement of the Asian/European jump may have been in order as investors look to make another run at Friday’s highs. In the EUR/USD in particular, the 50% retracement of the upward move is around the 1.2935 area and may be a good spot to ride back up to challenge the 1.30 barrier.

Therefore, I would be looking to buy at current depressed levels in the EUR/USD in anticipation of an afternoon bounce as investors factor-in the positive implications of US data and European issues get shoved to the side with the close of the European market.

For more intraday analysis and trade ideas, follow me on twitter ( @FXexaminer ) and/or Facebook (FX Examiner).

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

Neal Gilbert, an avid follower of the markets, began working at GFT in 2006, educating new and experienced traders in an easy-to-understand manner. His focus has been teaching common technical indicators, risk management, and sharing his favourite trading strategies. His Braving the Rapids strategy guide can be found on GFT’s website.

Neal conducts live webinars throughout the day, including his” Long and Short of It,” which is a Fundamental Live Market Analysis webinar centred on key economic releases. He also conducts webinars in Basic and Advanced Technical Indicators, Volatility and Risk Management, Trader’s Edge, and Fibonacci Trading and Theory.