Euro Soft as Greek PSI Talk Drags On

Euro is mildly softer today as Greek PSI talk drags on. Also, trading activities are subdued in Asia due to Chinese new year holiday. After intensive discussion over the weekend, there is no clear outcome from Greece and private investor on the debt swap deal yet. It's believed private creditors should have agreed on cutting down up to 70% on Greece debt values but many details remains unresolved. Note to mention that the plan needs to be approved by IMF and EU ministers. A key topic of negotiation is the new bond coupon rates which is believed to be around 4-4.5%. But IMF is insisting on around 4% coupon rate. Meanwhile, EU finance ministers will meet today in Brussels to discuss new budget rules, firewall to safeguard indebted Eurozone countries and the terms on the Greek swap deal.

Australia PPI rose less than expected by 0.3% qoq, 2.9% yoy in Q4. Markets expected 0.4% qoq, 3..0% yoy. Though, the year-on-year rate was above prior quarter's 2.7% yoy. Markets are expecting Wednesday's CPI release to show moderation from 3.5% yoy to 3.3% yoy, which would leave door open for further rate cut from RBA in February after cutting in November and December. Looking ahead, the economic calendar is light today with Canadian leading indicators and Eurozone consumer confidence featured.

Note that this week could an important week in deciding the near term relative strength between Aussie and Kiwi, with Australia inflation data and RBNZ rate decision scheduled. AUD/NZD's rebound from 1.2317 has finished at 1.3276 with the cross now staying well below 55 days EMA and daily MACD staying negative. Near term outlook favors deeper decline back towards 1.2317 level. Also, note that the whole fall from 1.3793 might be of the same degree as the medium term up trend from 2008 low of 1.0628. Hence, a break of 1.2317 will send the cross even lower to 100% projection of 1.3793 to 1.2317 from 1.3276 at 1.1800. Though, a break of 1.3181 resistance will invalidate this bearish case and turn outlook bullish for 1.3276 and above.

AUD/NZD" title="AUD/NZD" width="600" height="300">