Greek Banks Reopen

Daily Analysis - 20/07/2015

Local Banks Open for Restricted Transactions as a Crucial Repayment Looms


After three weeks of closures, Greek banks have reopened for business today however restrictions on total withdrawals remain. The Athens Stock Exchange remains closed and is not set to reopen after creditors approved a EUR 7 billion bridge loan to keep Greece solvent in the near-term.

Debt Relief Option Revealed

While Greece struggles to keep the economy afloat, the recently approved bridge loan will help the country meet today’s EUR 4.2 billion repayment to the European Central Bank and paves the way towards negotiations for further bailout funds essential for recapitalizing the banking system. However, in stark contrast to the fiery rhetoric out of Germany last week, Chancellor Angela Merkel has signaled the willingness of the European Commission to discuss the possibility of debt relief for Greece. This likely comes on the heels of remarks from both the ECB and IMF echoing the calls of the Greek Government to help make the outstanding debt commitments more sustainable. European participation in the next bailout is contingent on IMF participation, meaning that Europe’s negotiating position has been weakened by the IMF insistence on debt relief to increase the sustainability of debt.


Gold Flash Crashes

After breaking below a critical longer-term support level at $1132 per troy ounce last week, gold prices continue to slump following a brief crash overnight in which the precious metal lost over 45 points in an hour before recovering. This marks over a 4% move within a limited time period, heightening expectations that the massive dumping of gold futures has not yet subsided. Prices are currently rising back towards $1120, another key longer-term level in the precious metals benchmark, after touching the lowest levels since March 2010. The move was curious from a number of perspectives, most notably because there was no corresponding move in the US dollar which typically exhibits a strong inverse correlation to the momentum in gold prices. The move amounted to approximately $2.7 billion worth of notional contracts sold off in less than 1 minute, right before Chinese markets opened for trading.


Western Delegations Head to Iran

Business delegations have begun arriving in the Islamic Republic after the nuclear accord struck the previous week has paved the way for the reestablishment of commercial relationships after crippling sanctions prevented foreign firms from operating in the nation. The crude oil market has not reacted as positively to the development with resurgent fears that existing oversupply problems will be aggravated further as additional output hits global markets. American production has fallen from cycle highs as increasing defaults hit the oil patch following the expiration of price hedges and Saudi exports have also surprisingly fallen. Royal Dutch Shell, one of the largest global oil giants warned earlier in the month that prices could remain low for the next five years, only to witness a gradual recovery towards the longer-end of the time frame. Prices are trending slightly weaker to unchanged following the weekly reopening as concerns about the economic dynamics of the industry linger.


USDJPY Ascending Triangle Technical Pattern

After briefly unwinding and dropping precipitously, USDJPY continues to recover to the upside following the efforts in Europe to contain the Greek crisis and increasingly accommodative Chinese policy measures. The rally in the USDJPY pair has found resistance at the key longer-term resistance level at 124.20. Helping the pair rally higher was increased anticipation of a September rate hike after Federal Reserve Chair Janet Yellen’s testimony last week hinted at liftoff occurring sooner rather than later. The ascending triangle pattern setting up in USDJPY is a consolidation between the resistance level and the near-term uptrend, with any move above resistance considered a triangle-based breakout to be accompanied by increased momentum higher. However, should prices move below the near-term uptrend it could signal a reversal in the pair to the downside.


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