Greece-backed EUR sell-off dominates Asia, German CPI – Next up

FXStreet (Mumbai) – The latest headline on Greek capital control exacerbated the pain in the European currency and was heavily sold-off across the board as the debt-ridden nation nears June 30 deadline. Risk-off moods dominated Asia, with safe-haven demand for gold and yen rising. The biggest loser emerged so far on Greece crisis was the EUR/JPY cross, received double blow from both ends.

Key headlines in Asia

Greek capital controls confirmed by decree

EUR/USD crashes to 1.10 on Greek capital controls

Asian stocks dive as Greece crisis intensifies

BOJ Kuroda less optimistic about early inflation target goal

Dominating themes in Asia – centered on JPY, AUD, NZD

A volatile Asian session mainly driven by negative sentiments on the back of the unruly debt situation in Greece as the Greek officials imposed capital controls on the banks adding to the ongoing Greek woes. Asian markets dived in red, with Japanese indices leading the downfall. the Nikkei 225 in Tokyo is currently down over 2%, while the KOSPI in South Korea is losing nearly 1.5%. In Australia, despite further monetary policy easing in China over the weekend, the ASX 200 has fallen 1.80%.

Among the G10 currencies, the shared currency opened gap down and lost nearly 150 pips, sliding to fresh monthly lows as 1.0955 versus the greenback. Greek default fears and hence Grexit weighed on markets, pushing the traders to safety assets such as yen. USD/JPY slumped to lowest levels in six-weeks just ahead of 122 barrier. While the Antipodeans were largely supported, although upside capped, on China’s yet another surprise rate cut over the weekend. China is New Zealand’s and Australia’s top trading partners.

Heading into Europe – centered on EUR, GBP

A data-quiet European session ahead, with the German Prelim CPI report to be released. German CPI growth is seen adding 0.1% on a monthly basis after a 0.1% result reported a month ago, while adding 0.5% annually, following 0.7% reported in May.

Spain will report results of its retail businesses in May. April data showed a 2.9% annual increase in retail sales.

While ECB Chief Economist, Peter Praet, will participate in a panel discussion at the Swiss International Finance Forum 2015 in Bern, Switzerland. The central bank’s Governing Council member Ewald Nowotny is scheduled to speak at a conference in Vienna, Austria.

Later in the North American session, we have pending home sales data from the US to report with markets expected a 1.3% rise in June, easing from 3.4% increase recorded in May.

Greece – In focus

The Greek parliament approved on Sunday Prime Minister Alexis Tsipras’s proposed referendum on the bailout deal. The move has angered Athens’ international creditors and Greece is likely to default on an upcoming payment to the International Monetary Fund (IMF) on Tuesday, June 30.

Greeks will vote on Sunday, July 5 whether to accept or reject the latest offer by creditors to the Tsipras government aimed at unfreezing €7.2 billion in remaining bailout funds.

IMF Managing Director Christine Lagarde said on Saturday that “legally speaking, the referendum will relate to proposals and arrangements that are no longer valid.”

In a latest move, the Greek officials confirmed today of having imposed capital controls on Greek banks as the government tries to contain a bank run following heavy withdrawals last week.

EUR/USD Technicals

Analysts at TDS believe, “Within FX, the price action is unambiguously negative for EURUSD technically, with rebounds likely severely limited to the 1.1050 area, while any break below 1.08 would be a substantial signal of further downside. But at this stage, EURUSD is the limbo trade—the only question is how low it can go.”

“But EURUSD is likely a less clean way to trade the risk off move given any significant Eurozone shock will see the market reduce or reverse it’s long European equity positions and impact the FX hedges there, so we would prefer short EURJPY as the safest FX trade on the Greek crisis.”

The latest headline on Greek capital control exacerbated the pain in the European currency and was heavily sold-off across the board as the debt-ridden nation nears June 30 deadline. Risk-off moods dominated Asia, with safe-haven demand for gold and yen rising. The biggest loser emerged so far on Greece crisis was the EUR/JPY cross, received double blow from both ends.

(Market News Provided by FXstreet)