Market Focus on Greece; bond auction can’t stop the fall of euro

Tuesday, Nov 13, 2012

Market Review yesterday: yesterday the market waited for Greek news with light trading. EU and US stocks were flat. Commodities: gold and silver pulled back slightly. Crude oil remained relatively unchanged. Currencies: US related currencies were bouncing the trend, but European currencies were weaker. Commodity currencies were relatively strong.
Today the Greek debt shot into focus. Three commission reports were released, and the EU this week approved the probability of the third loan. Today's Greek bond auction will be the final guarantee of the debts that are due on Friday. Once the bond auction fails (assuming it does), Greek default is expected to lead the market into a panic. The US dollar, Yen will be pursued higher. If bond auction goes well, it only solves the urgency of the moment. The short uptrend of the Euro can only be short-lived. Wait for the arrival of the third aid payments, and market sentiment will be eased. A bailout agreement in debt write-off has not yet reached a consensus, and it needs more time to discuss who should bear the loss.
Today in the European session, a large number of UK data, like CPI and PPI data will be published. If they meet expectations, it will ease pressure off of the Bank of England, but an unexpected inflation will make monetary policy more cramped.

Operational recommendations this week

Yesterday three commissions submitted their Greek report. Assistance is scheduled to have grace period of two years, but the EU still has no approval when the position of the third round of assistance payments. Greek bond auction was additionally compelling. If not successful, which means this Friday Greece breach of contract will become a reality, resulting in market risk aversion, the euro would go down.

Yesterday the market was light. Greek problems continue to cause the risk currency pressure. The pound fell below 1.5883 downtrend resistance. Today the European session announced the PPI and CPI data, and if they meet the expectation the GBP uptrend callback might be in.

The brief strong AUD is waning, associated with the EU debt problems upgrade, then as well as fiscal cliff specific measures have yet appeared. The overall mood of the market in the hedge might tend to traditions. Australian dollar exchange rate might face risk of substantially lower. Today if 1.0414 cannot break through, then it will test 1.0400 integers resistance, if break below then it will test 1.0361.

USDJPY was higher in early trading, broke through to 79.5 range yesterday, but then risk aversion - driven by the downtrend euro - again pushed up the Yen. Today after the USDJPY is expected to again test the downtrend resistance 79.12 first-line.

The U.S. dollar went strong again in early trading, leading the USDCHF to break the high of 0.9491. It tested uptrend 0.9500 mark integer ranges yesterday. Today if it goes back to test 0.9491 and stabilizes, I expect it to go up.

Overnight, impacted by fiscal cliff and EU debt problems, the price of gold continued to fall below the lower edge of the shock interval 1729. This morning it failed to fall below 1720's downtrend resistance and test back. Today wait for it to test 1729.

Posted By: 

Chen Jingquan

Chen is a popular Forex Analyst in China. He setup his own financial consulting firm back in 2005 and started writing financial reports and analytical papers for various Chinese financial websites in 2007. He became a famous forex analyst in 2008 and a frequent guest in various forex seminars and interviews, including exclusive interviews held by CCTV finance channel,, Sina Finance, Sohui Finance and