Article / 19 June 2015 at 7:33 GMT

FX Update: USD stands its ground

Head of FX Strategy / Saxo Bank
  • Fiery rhetoric aplenty ahead of emergency Greek debt meeting
  • Greenback fights back after dovish FOMC lands a body blow
  • Sterling consolidates after strong data send GBP soaring

Day of reckoning: Strong words and mutual entrenchment characterise the Greek debt talks ahead of Monday's emergency Eurogroup meeting. Photo: iStock 

By John J Hardy

The latest in the ongoing Greek saga is that the European Union and Greece will convene an emergency meeting on Monday. Not many details are available at present, but the confrontational rhetoric makes everyone wonder if a deal is even possible at this point. 

It is also increasingly easy to find sober arguments in favour of Greece leaving the EU, as any “deal” will consign Greece to another decade or more of crushing debt burdens.   

The Bank of Japan statement merited little reaction overnight, as the bank delivered a more-or-less “wait and see”-type address that saw hardly any reaction in the market. More interesting was the Bank of Japan’s announcement of a new framework for its meeting and forecasting frequency, reducing the number of the former (thankfully!) and increasing the frequency of the latter as it will now produce quarterly rather than semiannual forecasts. 

This is clearly inspired by the Federal Reserve and makes more sense than the current, excessive frequency of meetings. The new framework will be in effect from January 2016. 

The most compelling development since yesterday is the lack of follow-through in USD selling after what was clearly a more dovish than expected FOMC meeting – could it be that the USD makes a stand here? 

So far, the initial support in USDJPY is holding at 122.50, EURUSD’s attempt to break above the 1.1380 now appears suddenly in doubt, and AUDUSD is well back below the 0.7820 resistance it broke yesterday. 

We’ll have a compelling setup for USD bulls heading into next week if the USD manages a smart, decisive rally today. 


USDCAD posted an interesting bullish reversal yesterday with the hammer candlestick after breaking to new local lows. This heightens interest in today’s Canadian data and whether we follow through a bit higher, which would provide even stronger arguments that we have put in a local low and can focus on a move back to the high of the range toward 1.2550 and then beyond to the secular highs.

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Source: Saxo Bank
The G-10 rundown

USD: After yesterday’s action, the jury is still out on whether the USD weakness will continue as the currency has survived the news flow quite well – a strong close today would be particularly interesting.

EUR: Understandable that the market is reluctant to make a dramatic statement as the uncertainty over Greece drags out. The question is also whether a deal on Greece, if it arrives suddenly, is really all that euro-bullish for more than a kneejerk reaction (outside of perhaps EURCHF).

JPY: BoJ comes up with nothing new and USDJPY bounces a bit – after USDJPY never broke the first support level at 122.50.

GBP: GBPUSD consolidating after its ripping rally above 1.5900. The first support comes in at 1.5815, the old high. EURGBP continues to trade heavily.

CHF: All quiet as the Swiss National Bank decided to make no waves at this week’s meeting. Still potential for downside once the clouds over the Greece situation clear – though the risks are certainly two-way in the near term if Greece decides to test the EU’s/IMF’s mettle with a debt repudiation.

AUD: Not impressed with the rally attempt, as AUDUSD melted back below the 0.7820 level that was broken yesterday. A weak close today sets up expectations for more downside next week.

CAD: The only currency with interesting data today; a solid bullish hammer formation yesterday as the steep selloff was sharply reversed. A follow-up rally back through 1.2300 would help shift the focus back higher for next week.

NZD: Even more bad data out overnight with the latest NZ confidence survey, but the lack of additional AUDNZD buying suggests the NZD weakness is getting excessive in places in the near term and may require some consolidation.

SEK: EURSEK range still in place with 9.17 low – tough to discern where we should be looking for a catalyst at the moment to pique interest in trading SEK. NOKSEK downside soon looking overdone in valuation terms.

NOK: A far more dovish Norges Bank than expected yesterday, and NOK appropriately responds with a selloff. There could be more downside short-term, but the NOK is getting very cheap in the fair value terms and there may not be much more to wring out of the currency unless oil prices suffer a new, big selloff.

Economic Data Highlights
  • New Zealand Jun. ANZ Consumer Confidence out at 119.9 vs. 123.9 in May 
  • Japan BoJ leaves monetary base expansion target unchanged at ¥80T/year 

Upcoming Economic Calendar Highlights (all times GMT)
  • Canada May CPI (1230)
  • Canada Apr. Retail Sales (1230)
  • US Fed's Williams to Speak (1540)
  • US Fed's Mester to Speak (1645)

— Edited by Michael McKenna

John J Hardy is head of FX strategy at Saxo Bank
Gwen Gwen
This comment has been redacted
fxtime fxtime
It is strange to read so many reports about Greece and how dire the consequences are should they adopt the drachma and the potential knock on effects to other European countries such as Spain et al. I am beginning to feel we are part of a media frenzy pushed along by Greece and Euroland in this one area so any fudge and delay will seem beneficial. Perhaps I am getting too cynical.


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