Good day Koalas..
today is CYPFB Day!
Yesterday, the budget deficit estimate of Greece was revised to 13.6% of the gross domestic product from 12.7%. This brought concerns as investors were alarmed by the higher deficit. The EUR/USD took a dive sub 1.3300. A strike by Greek civil servants closed hospitals and shut the historical Parthenon temple. Strikes are a disruption to the economy and this may further hurt the economy.
An emotional ride indeed. Having tested the 1.3200 line, the EUR/USD bounced off with a climb of more than 100 pips.
The S&P 500 shows off the American economy’s resilient again as it climbs above 1200 again.
Oil in the meanwhile climbs slightly on increased optimism and is currently trading at around $86.
Gold has gained considerably and is currently valued at around $1153. This may indicate increased demand. As gold is usually an investment of choice when there is uncertainty, this may indicate that risk aversion is strong.
Yes. It happened. Greece gave up her resistance and requested for a bail out. Perhaps another victim of what is known as market sentiments.
Continuing the negative sentiments of the previous day, the premium investors demanded to loan to Greece grew and it indicates that the market is probably not convinced of stability. As such borrowing costs are probably unsustainable, a bail out was deemed necessary by the Greek Prime Minister. Reports stated that the IMF assured Greece of a fast response. With the execution of the aid plans, the Greek Finance Minister said that that leaves “no doubt” about the debt repayment next month and the country will source for loans from the markets again “when the conditions are appropriate.”
As we witness the knee jerk reaction of the markets due to the relief of a bailout, strikes still threaten the aid process and the EU and IMF conditions have yet to be finalized. Should the conditions be deemed unacceptable by the markets, we may see further risk aversion. The fact remains that this is a short term solution and fundamentally, lots more need to be done for the Greek deficit crisis.
Bullish momentum may aim for a test of 1.3400.
A return of the bears may see us heading for 1.3360.
Finally it is the weekend. I plan to do more articles this weekend and hence do stay tuned!
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Trade safely and enjoy your Cash Your Pips For Beer day!