Daily Market Report 07/02/2012
The latest Greek deal deadline has once again come and gone with the decision of the debt-troubled country on accepting the terms of a new bailout re-postponed denting investors’ appetite for equities. It looks like the longer it takes, the greater the chances for a default are and this is likely to continue to weigh on the single currency. The main question however remains whether a potential default has been priced in the markets. Considering the increased optimism in equities this year it looks like not all risk correlated markets have responded appropriately to the ongoing crisis and that a bout of liquidation over the coming sessions is possible with safe haven options becoming more and more attractive. At 5885 this morning the FTSE 100 is now knocking on the door of June’s high.
The highlight of the day in the currency market has been the decision by the RBA to leave rates on hold at 4.25% catching market participants off guard, who expected a cut by 25 bps. Despite the dovish language accompanying the announcement the decision opened the door for a surge in the commodity currency across the board. The EUR/AUD was sent plummeting to yet another record low at 1.2164. The Euro is trading in an undecided territory around 1.31400 against the greenback. Any additional gains could be capped below 1.3500. Key support level sits at the 1.2620 area.
Gold is trading steady above 1700 this morning as investors remain focused on the developments of the Greek crisis talks. Key support and resistance levels to watch are 1760/62 to the upside and 1678/80 to the downside. Crude was given a boost after Obama signed an executive order imposing stricter sanctions on Iran and its central bank. At $115.85 this morning key level for the bulls to watch is at $18.30, April’s highs.
The economic calendar today is thin on the ground with the German industrial production being put out at 11.00 GMT and the US consumer credit at 20.00 GMT. The calendar promises more actions on Thursday when both the BoE and the ECB are announcing their interest rate decision.