Mid-Day Report: Greece Optimism Continues to Lift Euro, Political Leaders to Meet Today

Euro remains firm against dollar on optimism that somehow, there would be a deal in some sort to help Greece avoid disorderly default in March even though the progress has been extremely slow and unsatisfactory. Greek Prime Minister Papademos is expected to meet with three party leaders today finally to agree on the austerity measures. That's a key in clearing the EUR 130b second bailout from EU IMF. The progress on PSI has be "constructive" has described by Papademos. Meanwhile, there were reports that ECB would accept some sort of haircut which could help Greece lower it's debt by EUR 11b. After all, nothing is solid yet. But somehow, when investors patience limit was far breached, they seem to be looking beyond Greece.

Regarding Private Sector Involvement, EFSF Deputy CEO Frankel said the fund would "probably play a significant role" and they're "now waiting for the" private-sector involvement and “new program for Greece to be finalized." The PSI debt swap deal is expected to slice EUR 100b off the EUR 200b privately held debt and up to 70% loss in net present value. Average coupon rate of the swapped bonds, which was a deadlock, is believed to be finally agreed at 3.6%. Regarding Official Sector Involvement, it's reported that ECB is holding EUR 50b of Greek bonds which it paid EUR 39b for. With certain mechanism, ECB could return the bonds to Greece, through EFSF, and get back EUR 39b. Effectively Greece would have lowered it's debt by EUR 11b.

The optimism in Greece situation is somewhat reflected in the strong recovery in EUR/CHF. Of course, Interim SNB president Jordan stepped up rhetoric this week and reiterated the bank's utmost determination in defending the 1.2 floor. That's certain another factor that's supporting EUR/CHF. Technically, the cross, which is in buy zone, is likely building up upside momentum. Meanwhile, attention will be paid on 1.2132 minor resistance. Break of which will likely trigger some buy orders to push the cross back above 1.22 level at least.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5820; (P) 1.5863; (R1) 1.5938; More.

Intraday bias in GBP/USD remains on the upside and current rise from 1.5234 should be targeting to 1.6165 key cluster resistance (61.8% retracement of 1.6746 to 1.5234 at 1.6168). Break will confirm that whole decline from 1.6746 has finished at 1.5234 already. On the downside, break of 1.5729 support is needed to indicate short term topping. Otherwise, near term outlook will remain cautiously bullish even in case of retreat.

In the bigger picture, price actions from 1.3503 are treated as consolidations to long term down trend from 2.1161. At this point, we're favoring the case that such consolidation is either finished with three waves to 1.6746, or five waves as a triangle at 1.6165. Deeper decline is in favor to 1.4229 key support and decisive break there should extend the long term down trend through 1.3503 low. Meanwhile, strong rebound ahead of 1.4229, or a break of 1.6165, will dampen the immediate bearish view and extend the consolidation from 1.3503 instead.

Economic Indicators Update

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