Forex Daily Review: Austerity Measures are Questioned by Greek Court, NFP Strategy is for CAD/JPY
EUR/USD, Recent Weakness Explained
EUR/USD was the brightest star in yesterday's session following better-than-expected US data. However, as expressed in yesterday's market review the strong gains quickly evaporated in thin market conditions as euro-negative news from Greece resuscitated the elderly bears.
As I've repeatedly discussed throughout the past reviews the new austerity measures in the labour market may not pass the upcoming vote in Greece on 11 November due to the vast objection of the opposition. The recent privatization bill that was approved on Wednesday and scheduled to be voted on 11 November (Greece international creditors' demanded House vote) resulted in one PASOK member (MP Michalis Kassis) and a prominent official to quit the political party. The concern was regarding the sell-off of Greek ports and utilities. 17 PASOK members rejected the measures but the bill passed through a narrow vote. 11 November is therefore a significant day for global markets as should the House disapprove the new bill a strong sell-off will be seen across the leading European indices (DAX, CAC).
In the Forex market, the Euro is likely to be dumped by large traders in an attempt to flee the 'diseased' currency.
Greek Austerity Measures are Questioned by Greek Court
Recent weakness in Euro-dollar is as a result of a Greek court ruling that pension reforms demanded by Troika to ensure Greece will receive the next tranche of the bailout funds could be unconstitutional. If the new reforms are found to be against the Greek constitution a referendum will have to be made (as seen in Ireland with the Fiscal Compact Treaty) to ensure the new austerity measures are applied. Forex traders are well-aware the above, which is why we are seeing heavy selling EUR/USD early in the European session. I am reminding that there is a report that suggests a secret bailout package for Greece (said to range between €15 -30 billion) is being discussed by EU leaders. The new Greek bailout is said to be announced on 14 November but at the time of this writing it appears to me as a pure speculation.
German Government Press Conference and DNT Options in EUR/USD
Main focus will be on the German government press conference at 10:30am GMT. I am uncertain whether Greece will be mentioned by the press conference will be closely observed by investors and traders across the globe.
Market talks point to a 1.2880-1.3040 Double-No-Touch (DNT) option that is set to expire in today's NU cut and another at 1.2810-1.3240 on 9 November. Those price levels are likely to draw some attention and may be protected by the DNT holders. Expect a volatile session as near the US non-farm payrolls at 12:30om GMT.
Non-farm Payrolls Trading Strategy, CAD/JPY
CAD/JPY has maintained its bullish trend following strong JPY weakness. CAD/JPY technical analysis reveals the FX cross is due to correct lower. Overbought intraday indicators concrete my views for a bearish reversal as well as the Japanese reversal pattern, 'Hanging Man.' However, despite the expected weakness I will label the price action as corrective weakness before the resumption of the uptrend re-emerge from the weakness. There is fairly strong support at 80.04, which in my view should support any potential weakness and the bullish target for CAD/JPY trading strategy is seen at 80.90. The 55MA (in pink) may attempt a bullish cross with 200MA (in orange) if 80.04 holds, which reaffirms the bullish outlook for CAD/JPY.
The non-farm payrolls at 12:30pm GMT will be the focal point for CAD/JPY technical analysis. I will highlight that there is faint talk the previous figure for the non-farm payrolls may be revised higher but I base my analysis solely on the graph.
