Source: ForexYard
Last week’s relief rally that swept over financial markets has all but vanished with a move lower in risky assets driven by deterioration in the macro environment. In addition to the announced Greek referendum and disappointing Chinese/UK PMI data are weighing on the markets. European equities have been crushed with both the DAX and the CAC 40 down 5%.
The Greek referendum appears comical. After struggling for the past two years fending off a messy default, Greek Prime Minister George Papandreou invites the opportunity with one vote. As additional market commentaries and forex blogs have noted, the referendum could be a step in the direction of a Greek exit from the EMU. As such, the wheels of the EUR are beginning to come off with the EUR/USD down 2 big figures today. Support for the pair is the 61% retracement of the October move at 1.3565.
PMI data released from China and the UK did little to improve the global economic outlook. China’s Purchasing Manager’s Index fell to 50.4 in October, dangerously close to the 50 boom/bust level. The UK’s PMI also dropped to 47.4 from 50.8 in the previous month. Today’s Q3 GDP was stronger than expected at 0.5% on forecasts for 0.4%, but the GDP data is in the past and the PMI numbers are forward looking which does not bode well for the UK economy. Cable has held up a bit better as the GBP/USD has not receded quite as much of the October gains as its European counterpart. Support is seen at 1.5850 from the rising short term support line off of the October 12th low.
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