Currencies traded in well-established ranges Tuesday, with market players hopeful that outside stimuli would soon lead to a breakout. Upcoming data sets aside, month-end bookkeeping will likely be the driver of any trend shift in the near-term, traders said.
Confirmation of a Greek debt deal and increased likelihood that Greece would get its Troika tranche by December 13 prompted a mild risk rally overnight, with the euro briefly rising over the psychological $1.3000 mark. German Finance Minister Wolfgang Schaeuble said earlier Tuesday he was “relatively confident” that the debt buy-back program for Greek bonds on secondary markets would bring the desired result. Schaeuble said that the Eurogroup and the IMF would evaluate on December 13, after the debt buy-back, whether Greece’s debt sustainability had been assured. It remains unclear when Germany’s lower house of parliament, the Bundestag, will vote on the Greek aid deal. While the government favors a vote this Thursday or Friday, opposition leader Frank-Walter Steinmeier said his SPD wants to vote this week only on the debt buyback plan. A vote on the full package should only occur by mid-December after the IMF approved the debt sustainability of the plan, he said.
Traders had long warned that any rally on a Greek debt deal would be short-lived and that there would be solid euro selling over $1.3000. Indeed, the pair stalled near $1.3010 overnight, after breaking above a 17-month trendline around $1.3002. Subsequently, the euro, and risk assets in general, succumbed to profit-taking and modest paring back of positions. Traders voiced dismay about the lack of volatility and corporate and global investor interest. “Today, the euro’s been $1.2930-40 almost all day and yesterday, we spent the whole day $1.2960-70,” one trader said. With such tight ranges, “it is hard to get an idea of the trend,” he said. As Greek debt concerns fade, the focus was starting to shift to the December 6 European Central Bank meeting, where some analysts still saw scope for a 25 basis point rate cut, but market players generally expected the ECB to keep its powder dry until next year.
The euro was trading at $1.2939, Tuesday, on the low side of a $1.2916 to $1.3010 range. The pair stalled earlier at the 55-day moving average, which comes in currently at $1.2916. A decisive break below the 55-day would target a return to the November 13 lows near $1.2660. However, as long as the 55-day holds, the market will watch to see if the euro can break above the late October highs near $1.3020-25 range.
EasyForexNews Research Team