An IMF backed EU aid package was offered to debt-laden Greece yesterday in an attempt to boost confidence in the Euro which had fallen more than 7% year-to-date. The aid comes by way of up to 30 billion euros in 3-yr loans at a market discounted rate of 5%, with up to 15 billion expected from the IMF. Falling demand for Greek bonds had pushed yields to an 11-year high, making the cost of financing debt unsustainable. The Euro rallied on the announcement, rising as high as 1.3690, while improved risk appetite lowered demand for the greenback. The situation in Greece remains fragile as questions arise as to the long-term solvency of the Greek government. Although concerns about an immediate default may have been subdued, uncertainty is likely to plague the region until Greece effectively demonstrates that it will be able to adhere to the recent austerity measures that have been implemented. All eyes will be fixed on today's 1.2 billion euro short-term Greek treasury auction. Expectations are that the sale will be a successful one. Demand for longer-term treasuries however, which will be more focused on solvency rather than immediate liquidity, is likely to remain weak.
Euro Holds
The euro was largely unchanged early in London after pulling back from the weekend's stellar rally. The single currency rests just under the 1.36 handle with interim resistance seen at 1.3630, followed by the 1.37 figure. Stronger supply is seen at the 61.8% Fibonacci extension taken from the Dec 18th 08' and Nov 26th highs, at 1.3750. Support remains at 1.3570 and is backed by 1.3540 and the 1.35 handle. Longer-term targets extend to 1.3480 and 1.3460.
Aussie Weakens
Commodity prices continued to fall with gold and crude oil reaching $1151.10 and $83.68 respectively. The aussie drifted lower and now sits below the .9260 resistance level. Subsequent ceilings emerge at .9280, backed by the .93 handle and .9320. A breach of the .94 figure could lead to gains to the 100% Fibonacci extension taken from the Feb 25th and March 26th lows, at .9450. Stronger supply is seen at .9480. Downside risk increases with a move below .9210, with additional support eyed at .9170, followed by the S1 monthly pivot at .9130 and the .91 handle.
Today's economic calendar includes trade balance figures from Canada and the US at 8:30am in New York. Later in the day, IDB Economic Optimism, and ABC consumer confidence data are both seen higher. Asian markets were mostly lower on profit taking after the Dow closed above the psychological 11,000 mark yesterday. European markets are mixed with US equity futures pointing to a softer open early in London trade.
