Euro: So When Is The Second Greek Bailout Vote Happening?

By John Kicklighter, Currency Strategist

• Dollar Wins Critical Break Only to be Knocked Back in Greek Churn
• Euro: So When is the Second Greek Bailout Vote Happening?
• British Pound Traders Ready to React to Labor Data, BoE Inflation Report
• Japanese Yen Mixes BoJ Stimulus and Risk Appetite for Effective Decline
• Australian Dollar Finds Asian Session Strength as PBoC Talks EU Crisis
• New Zealand Dollar Jumps after Retail Sales Figure, Continues with Risk
• Gold: The Only Thing Not Moving on a Tense, Volatile Day

Dollar Wins Critical Break Only to be Knocked Back in Greek Churn

The dollar looks as if it is manic-depressive . Through the first half of the US session the currency forged significant gains against most of its most liquid counterparts (European and high-risk currencies alike). Yet, by the end of the New York session heading into Asian trading hours, the greenback retreated sharply. The indecisiveness is the work of underlying risk trends which are taking a greater interest in what happens with the Euro Zone’s financial crisis (Greece). Where the Euro and S&P 500 head, expect the dollar to be moving in the opposite direction.

Euro: So When is the Second Greek Bailout Vote Happening?

The fundamental compass on the euro has gone haywire and we have paid for it in volatility. The shared currency suffered multiple reversals over the past 24 hours as the read on the region’s financial crisis improved, deteriorated and improved again. We were heading into Tuesday’s trading session equipped with the knowledge that the Greek Parliament had approved what it believed were the necessary requirements from the EU to secure the second bailout package. That relief didn’t last long, however, as the region’s ministers determined ‘not all the paperwork was done’ and therefore, the meeting would be postponed until next week. It non-political speak, this translates into: ‘we haven’t heard a unanimous agreement from Greece’s political leadership to stay the course after they win the €130 billion package.’ The impact on the euro and general risk trends was clear and severe (relative to recent trading conditions). That wasn’t the final word as unnamed Greek officials said conservative party leader Samaras (most likely the next Prime Minister) would sign a letter of commitment and the PBoC vowed support. Yet, there has been nothing to suggest Wednesday’s originally-scheduled meeting would be back on. Yet another monkey wrench in a mechanism that has been harangued by problems. How long does the market tolerate this spectacle is a real concern. In the meantime, we’ll see how euro sentiment settles in the upcoming session and see if the big-ticket Euro Zone, German, French and Italian 4Q GDP figures add to the equation.

British Pound Traders Ready to React to Labor Data, BoE Inflation Report

If there was any doubt as to the sterling’s connection to the euro’s bearing, the 20-day rolling correlation between EURUSD and GBPUSD is currently 0.84 (1.00 being perfect and 0.00 representing complete randomness). On a shorter time frame, the connection is even stronger (the 5-day or one-week link is a remarkable 0.96). As such, those looking for the pound’s trend should keep a close eye on how the Euro-area financial situation progresses. That said, there is plenty of room for short-term divergence in the form of scheduled event risk . We’d reserve expectations of separation from dominant theme only through meaningful developments, but the upcoming docket fulfills that requirement. With the focus still firmly fixed on the balance between economic activity and austerity in the UK, we come upon the jobless claims figures and BoE Inflation Report. What should we look for? A strong employment figure and outlook for more stimulus would fit nicely with the current ‘risk-on’ theme.

Japanese Yen Mixes BoJ Stimulus and Risk Appetite for Effective Decline

I had set my expectations for a reaction from the Japanese yen to the Bank of Japan’s policy decision yesterday low – perhaps too low. In the aftermath of the central bank’s changes, the USDJPY surged another 100-plus points while other yen-based crosses carved out rallies of their own. Where is this strength coming from? In the policy decision itself, the ¥10 trillion increase in the asset purchasing program to ¥30 trillion total represents a significant bid for the region. Yet, does it really differ that much from the previous steps taken at previous meetings? Alternatively, setting an inflation goal of 1 percent merely offers a target without means to reach it. Plenty of people have speculated that this is a sign of ‘stealth intervention’ which presents a temptingly simple explanation. Yet, there is perhaps a more reasonable explanation: risk appetite trends. Though both the dollar and yen are safe haven currencies, USDJPY has shown positive risk correlations when major themes are stable.

Australian Dollar Finds Asian Session Strength as PBoC Talks EU Crisis

Consumer Confidence survey figures for February posted an unexpectedly strong 4.2 percent increase through the Westpac’s index. This would have matched the previous reading’s five-year high had it not been revised higher. Regardless of this historical performance, the data itself would generate little response from the market. Fundamentally, domestic consumption expectations matter relatively little to a currency that is basing much of its strength on the foreign demand for its raw materials and the inflow of capital seeking yield. Therefore, with an eye on risk appetite trends, we could spot the meaningful correlation between AUDUSD and the S&P 500 futures or the Nikkei 225 future. The session-end rally in risk through the New York market offered a boost, but this run through the Asian session following the PBoC’s open promise to help the EU through its difficulties is proving more fruitful.

New Zealand Dollar Jumps after Retail Sales Figure, Continues with Risk

Where goes risk, so does the New Zealand dollar. As surely as the Aussie currency has taken higher alongside equities in the Asian session; the kiwi will be making a similar advance. That said, the currency received an additional boost from its own scheduled event risk in the form of a 4Q retail sales report that handily bested expectations with a 2.2 percent climb. For consistent influence though, just in case sentiment returns in a meaningful way, we should be aware of the yield that the New Zealand dollar will be working with to whet the appetites of carry traders. The benchmark yield may be 2.50 percent, but the money market rate is running 2.95 percent while the 10-year bond rate is currently 3.98 percent. In fact, when adjusted for 4Q inflation figures, the real rate return (yield minus inflation) on the New Zealand government bond is significantly better at 2.18 percent versus the Australian 0.9 percent equivalent.

Gold: The Only Thing Not Moving on a Tense, Volatile Day

Volatility has notably picked up for the FX and capital markets over the past 12 hours; and yet, gold is still working its way deeper into congestion. As a safe haven asset, it isn’t difficult to generate activity for the metal; yet this is not a freely associated alternative to a currency (the greenback is a preferred FX alternative to something like the Aussie dollar) or equities (bonds or cash have been generally preferable on this front). To rouse gold to life, we need underlying sentiment with drive behind it. In the meantime, we find the average five-day daily range through Tuesday’s close was $16.95 (the lowest since July 18 th ), the CBOE’s volatility measure for gold is just off seven month lows and futures volume is still exceptionally light. If the dollar maintain a clear trend (bullish or bearish), gold will find greater charge for a counter-run.

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ECONOMIC DATA

N ext 24 Hours

GMT	Currency	Release	Survey	Previous	Comments
0:30	AUD	New Motor Vehicle Sales (MoM) (JAN)		-2.9%	Australian large purchases continue to see declines
0:30	AUD	New Motor Vehicle Sales (YoY) (JAN)		-3.0%
2:00	NZD	Non Resident Bond Holdings (JAN)		59.1%	Interest in NZ bonds recovering
6:00	JPY	Machine Tool Orders (YoY) (JAN F)		-6.6%	Machine tools continue to drop
6:30	EUR	French GDP (QoQ) (4Q P)	-0.2%	0.3%	Focus remains on German output
6:30	EUR	French GDP (YoY) (4Q P)	1.1%	1.5%
7:00	EUR	German GDP n.s.a. (YoY) (4Q A)	1.8%	2.5%	German GDP expected to drop in 4Q, in line with global data; ECB reaction may be limited
7:00	EUR	German GDP s.a. (QoQ) (4Q A)	-0.3%	0.5%
7:00	EUR	German GDP w.d.a. (YoY)(4Q A)	2.0%	2.6%
9:00	EUR	Italian GDP s.a. and w.d.a. (QoQ) (4Q P)	-0.6%	-0.2%	Peripheral GDP continues to sink
9:00	EUR	Italian GDP s.a. and w.d.a. (YoY) (4Q P)	-0.3%	0.2%
9:30	EUR	Italian General Government Debt (DEC)		1905.0B	Recovering on austerity
9:30	GBP	Claimant Count Rate (JAN)	5.1%	5.0%	British labor market expected to weaken further, though any additional BoE easing will have to wait until market takes in effects of latest round of QE
9:30	GBP	Jobless Claims Change (JAN)	3.0K	1.2K
9:30	GBP	Average Weekly Earnings (3M/YoY) (DEC)	1.9%	1.9%
9:30	GBP	Weekly Earnings exBonus (3M/YoY) (DEC)	1.9%	1.9%
9:30	GBP	ILO Unemployment Rate (3M) (DEC)	8.4%	8.4%
10:00	EUR	Euro-Zone GDP s.a. (QoQ) (4Q A)	-0.4%	0.2%	Overall Eurozone still growing, though at a much slower pace
10:00	EUR	Euro-Zone GDP s.a. (YoY) (4Q A)	0.7%	1.4%
10:00	CHF	ZEW Survey (Expectations) (FEB)		-50.1	Swiss ZEW may fall further
10:00	EUR	Euro-Zone Trade Balance s.a. (euros) (DEC)	4.5B	6.1B	Eurozone trade expected to slow again as German exports weaker
10:00	EUR	Euro-Zone Trade Balance (euros) (DEC)	3.5B	6.9B
12:00	USD	MBA Mortgage Applications (FEB 10)		7.5%	Weekly data showing improvement
13:30	USD	Empire Manufacturing (FEB)	14.8	13.48	NY industries stronger
14:00	USD	Total Net TIC Flows (DEC)		$48.6B	Market interest in treasuries tapering as risk appetite increases
14:00	USD	Net Long-term TIC Flows (DEC)	$35.0B	$59.8B
14:15	USD	Industrial Production (JAN)	0.6%	0.4%	National production expected to still grow
14:15	USD	Capacity Utilization (JAN)	78.6%	78.1%
15:00	USD	NAHB Housing Market Index (FEB)	26	25	Index recovering slowly
15:30	USD	DOE U.S. Crude Oil Inventories (FEB 10)		304K	Energy data could show additional demand as US economy climbs back
15:30	USD	DOE Cushing OK Crude Inventory (FEB 10)		367K
15:30	USD	DOE U.S. Distillate Inventory (FEB 10)		1174K
15:30	USD	DOE U.S. Gasoline Inventories (FEB 10)		1629K
21:00	NZD	ANZ NZ Job Ads (MoM) (JAN)		-2.3%	Jobs market may soften
21:30	NZD	Business NZ Perf of Manufacturing Index (JAN)		51.9	Index has been hovering near 50
	JPY	Bank of Japan Rate Decision	0.10%	0.10%	Widely expected to hold
	CNY	Actual FDI (YoY) (DEC)		-12.7%	Investment continues to drop

GMT	Currency	Upcoming Events & Speeches
10:30	GBP	Bank of England Inflation Report
13:30	USD	Revisions: Consumer Price Index
17:15	USD	Fed's Fisher Speaks in San Marcos
19:00	USD	Fed Releases Minutes From Jan. 24-25 FOMC Meeting

SUPPORT AND RESISTANCE LEVELS

To see updated SUPPORT AND RESISTANCE LEVELS for the Majors, visit Technical Analysis Portal

To see updated PIVOT POINT LEVELS for the Majors and Crosses, visit our Pivot Point Table

CLASSIC SUPPORT AND RESISTANCE – EMERGING MARKETS 18 :00 GMT SCANDIES CURRENCIES 18:00 GMT

Currency	USD/MXN	USD/TRY	USD/ZAR	USD/HKD	USD/SGD		Currency	USD/SEK	USD/DKK	USD/NOK
Resist 2	16.5000	2.0000	9.2080	7.8165	1.3650		Resist 2	7.5800	5.6625	6.1150
Resist 1	14.3200	1.9000	8.5800	7.8075	1.3250		Resist 1	6.5175	5.3100	5.7075
Spot	13.1813	1.8298	7.9516	7.7618	1.2719		Spot	6.7826	5.7501	5.9324
Support 1	12.6000	1.6500	6.5575	7.7490	1.2000		Support 1	6.0800	5.1050	5.3040
Support 2	11.5200	1.5725	6.4295	7.7450	1.1800		Support 2	5.8085	4.9115	4.9410

INTRA-DAY PROBABILITY BANDS 18:00 GMT

\ Currency	EUR/USD	GBP/USD	USD/JPY	USD/CHF	USD/CAD	AUD/USD	NZD/USD	EUR/JPY	GBP/JPY
Resist. 3	1.3096	1.5727	77.65	0.9464	1.0227	1.0620	0.8168	100.92	121.26
Resist. 2	1.3055	1.5689	77.49	0.9434	1.0203	1.0586	0.8142	100.59	120.94
Resist. 1	1.3014	1.5652	77.33	0.9405	1.0179	1.0552	0.8116	100.27	120.61
Spot	1.2931	1.5576	77.01	0.9345	1.0132	1.0484	0.8063	99.62	119.97
Support 1	1.2848	1.5500	76.69	0.9285	1.0085	1.0416	0.8010	98.97	119.32
Support 2	1.2807	1.5463	76.53	0.9256	1.0061	1.0382	0.7984	98.65	119.00
Support 3	1.2766	1.5425	76.37	0.9226	1.0037	1.0348	0.7958	98.32	118.67

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--- Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

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