The financial markets are hit hard by the Greek vote as the week opened. Nikkei is trading down over -300 pts, or -1.5% at the time of writing while HK HSI is down -800 pts or -3% at the time of writing. Euro gapped down the week to as low as -1.0958 against dollar but recovered ahead of last week's low of 1.0954. EUR/JPY also dived to as low as 133.85 but recovered ahead of last week's low 133.77. Yen was strong against other major currencies on risk average but there is no follow through buying. Indeed, yen retreats after failing to take out last week's high against other majors.
In Greece, voters shocked the world by giving an overwhelming victory of "No" votes in Sundays' referendum. It's reported that with half of the votes counted, there was over 60% of Greeks rejected the bailout terms by the international creditors. And they supported prime minister Alexis Tsipras's stance on the negotiation with the creditors. It's expected a "no" win will now more likely lead Greece to default and exit of Eurozone. And some analysts warned that such exit could come under chaotic circumstances.
German chancellor Angela Merkel will fly to Paris today to meet with French president Francois Hollande on the way forward regarding Greece. The government representatives said in an email statement that they will "jointly assess the situation after the Greek referendum and to address the continuation of Franco-German close cooperation in this matter". ECB will also hold a conference call today on what to do with Greek lenders. At this point, it's expected that ECB will maintain the emergency liquidity assistance for Greek banks for the time being.
Elsewhere, Australia TD securities inflation rose 0.1% mom in June. Japan leading indicator will be released later in Asian session. German factory orders, Eurozone retial PMI and Sentix investor confidence will be featured in European session with Swiss CPI. In US session, US ISM services and Canada Ivey PMI will be released. But main focus for today and for the next few days, at least, will stay on Greece and Eurozone.
Looking ahead, two central banks will meet this week including RBA and BoE and both are expected to keep policies unchanged. FOMC minutes will be watched for clues on the chance of a September rate hike. Meanwhile, UK annual budget release will also catch much attention. Other key data to watch include UK productions, Australia employment and Canada employment. Here are some highlights:
- Tuesday: RBA rate decision; Swiss unemployment; German industrial production; UK production; Canada trade balance; US trade balance
- Wednesday: UK annual budget release; Canada building permits; FOMC minutes
- Thursday: Australia employment; China CPI, PPI; German trade balance; BoE rate decision; US jobless claims; Canada housing starts and NHPI
- Friday: Australia home loans; UK trade balance; Canada employment
Updating trading strategies noted in our usual weekly reports, out EUR/AUD long was stopped out last week as EUR/AUD dipped to 1.4314. That was a rather unlucky one as EUR/AUD quickly rebounds and has needed resumed recent rise. Bullish outlook in EUR/AUD was maintained but reading in daily MACD indicates a bit unconvincing momentum. We'll stay away from the cross first but will keep an eye on it for another long opportunity. Also, we're short Aussie in AUD/USD which is running well so far. The break of 0.7532 low was anticipated. And as the larger down trend is resuming, we'll stay short. We'll hold on to AUD/USD short and lower the stop to 0.7600.