FOREX: Euro, Major Currencies Still Looking To Greece For Direction

By Ilya Spivak, Currency Strategist

Talking Points

• Markets Positioned for Successful Greek Accord as Stock Index Futures Rise
• German Industrial Production May Surprise Higher After Pickup in PMI Data
• Australian Dollar Soars as RBA Unexpectedly Holds Interest Rates Unchanged
• Japanese Yen Down After MoF Reveals Five "Stealth" Interventions in Q4

Most major currencies were little changed against the US Dollar (ticker: USDollar ) in overnight trade as markets waited for clarity on the status of negotiations between Greece and the so-called “troika” of the ECB, the EU, and the IMF on the debt-strapped country’s second bailout package. The Australian Dollar outperformed after the Reserve Bank of Australia left benchmark interest rates unchanged at 4.25 percent , disappointing widespread expectations for a 25bps reduction. The Japanese Yen declined after the Ministry of Finance revealed it intervened five times in the USDJPY exchange rate in the fourth quarter.

Greek Prime Minister Lucas Papademos set a deadline of 10:00 GMT yesterday for ruling coalition party leaders to decide if they were prepared to signed on for more austerity – which the troika demands in exchange for an additional tranche of aid – to avert a default looming as soon as March 20 when €14.5 billion in debt is due to mature. That deadline passed and was extended seemingly without incident, but German Chancellor Angela Merkel and French President Nicolas Sarkozy ominously warned that “time was running out” and reiterated that no deal on additional funding would be possible without Athens’ assent the troika’s demands.

Greek labor unions are preparing to stage yet another strike as negotiations continue to drag on, adding to the tension quotient. Still, traders appear to believe that the potential consequences of a disorderly default will compel all parties to reach agreement before the point of no return. Indeed, European and US stock index futures are inching higher in late Asian hours, suggesting risk appetite is relatively well-supported. On the economic data front, German Industrial Production figures are in focus, with expectations calling for output to print flat in December, though a pickup in the more timely Manufacturing PMI reading over the same period suggests there may be room for an upside surprise.

Asia Session : What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
21:45	NZD	Average Hourly Earnings (QoQ) (4Q)	0.0%	0.5%	1.3%
21:45	NZD	Private Wages ex Overtime (QoQ) (4Q)	0.7%	0.5%	0.5%
21:45	NZD	Private Wages inc Overtime (QoQ) (4Q)	0.7%	0.5%	0.5%
22:30	AUD	AiG Performance of Construction Index (JAN)	39.8	-	41.0
23:50	JPY	Official Reserve Assets ($) (JAN)	1306.7B	-	1295.8B
0:01	GBP	BRC Sales Like-For-Like (YoY) (JAN)	-0.3%	-0.8%	2.2%
3:30	AUD	Reserve Bank of Australia Rate Decision	4.25%	4.00%	4.25%
5:00	AUD	Foreign Reserves (A$) (JAN)	46.8B	-	A$46.1B
5:00	JPY	Coincident Index (DEC P)	93.2	93.1	90.3
5:00	JPY	Leading Index (DEC P)	94.3	93.8	93.7 (R+)

E uro Session: What to Expect

GMT	CCY	EVENT	EXP	PREV	IMPACT
7:45	EUR	French Trade Balance (€) (DEC)	-5350M	-4412M	Low
8:00	CHF	Foreign Currency Reserves (CHF) (JAN)	-	254.2B	Low
11:00	EUR	German Industrial Production (MoM) (DEC)	0.0%	-0.6%	Medium
11:00	EUR	German Industrial Production (YoY) (DEC)	4.3%	3.6%	Medium

Critical Levels

CCY	SUPPORT	RESISTANCE
EURUSD	1.3055	1.3226
GBPUSD	1.5753	1.5910

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

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Original Article: http://www.dailyfx.com/forex/fundamental/daily_briefing/session_briefing/euro_open/2012/02/07/FOREX_Euro_Major_Currencies_Still_Looking_to_Greece_for_Direction.html

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