Review of July 6: Greece without Varufakis. Forecast for Tuesday, July 7

By | July 6, 2015

Start of week as a whole, was quite positive, despite the fact that Monday opened a gap down the EUR / USD and USD / JPY on the results of the Greek vote. However, in the afternoon, all the negativity has been neutralized, which contributed and hope that Athens still agree with the “threesome” after the departure of Varufakis and rather weak data on business activity in the US service sector, pressured on the USD.

Stock indices were also able to recover from the initial sales, but commodity markets remained a stronghold of the negative. Brent crude oil sliding to three-month low of 56.38 dollars per barrel, and gold – came to $ 1162.89 per ounce.

Chart of the day:

brent crude oil chart
Brent crude oil chart

Economic data:

  • Greece voted against the EU proposal. 61% of the population voted in such a way
  • Finance Minister Janis Varufakis resigned, which was seen as a signal to an agreement the EU.
  • US June ISM index in the service sector 56 vs. 56.2
Forecast for Tuesday, July 7
Stock market 
It is obvious that, in connection with the results of the Greek referendum we have seen a massive exodus from riskier assets lower. And, of course, among the first to suffer from the stock markets. And, of course, most of the indices of the countries that suffer losses due to the inability to service their loans to Athens. In this sense, come to mind at once the German DAX (FDAX) and the British FTSE (Z) due to the close economic ties and geographical proximity.
Most likely, both the index will suffer losses during the first days after the vote, but we advise to use this fall to enter the market at more attractive Long levels. And more interesting dynamics can show the British benchmark. The fact that immediately after the first panic dissipated, the market will consider in more detail the situation and realizes that British banks are not at risk from Athens, since they hold less than 1% of Greek assets. Much more dangerous are the defaults for the UK Italy, Spain and Portugal (60% of the securities of British banks). Thus, the shopping area in 6440 by FTSE looks pretty interesting.
Commodity and raw market
Prices of Brent crude oil continued to remain under pressure due to the presence of multiple pressures, and, quite likely, these factors will help to upgrade the asset 3-month low with the immediate goal area of 55.60 dollars per barrel. The fact is that in addition to the dominant theme of Iran, which may be about to throw the market large volumes of proposals came on the scene and the issue of the consequences of the Greek referendum and the question of panic in the Chinese stock market, which has forced the Chinese to go to the emergency support measures.    

Recall that both China and Europe is a net importer of oil, and thus, the threat of recession could mean a decrease in demand for energy. Thus, in the short term it makes sense to hold a bearish strategy, but for long-term players in the current levels look attractive entry points for the purchase, as panic and Greece, and on the Chinese stock market could quickly evaporate.

Currency market
Commodity currencies continue to incur losses under the influence of low commodity prices, but the greatest pressure on their shoulders feel the Australian dollar – it has fallen to a more than 6-year low against the US currency. Last week, data on the trade balance of Australia was worse than expected. Retail sales also fell short of expectations. 

And today, we have to learn and decision of the Reserve Bank’s monetary policy. Despite the fact that the expectations indicate a constant level, it is quite possible we will hear next hints of “too expensive currency” that is able to send the AUD / USD to 0.7460. And if the Chinese Shanghai Composite stock index will continue to fall, it is possible testing 0.74.

Warning: Profitability in the past does not mean profitability in the future. Any projections are for informational purposes and do not guarantee the results obtained.

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