USD/CAD on Cusp of Breakout as EUR/USD Retreats
- EURUSD back down towards $1.1100 after Greek letter circus.
- USDCAD breaking through TL from March, June highs.
The USDOLLAR Index is looking on firmer ground after yesterday's recent uptrend retest. We're not just talking about the individual components of the index, in particular EURUSD and GBPUSD, which are fueling the gauge's rise today. For EURUSD, the earlier news that Greek Prime Minister Alexis Tsipras was willing to accept the Eurogroup's aid proposal in exchange for funds to meet debt repayments proved to be a solid bullish catalyst. Until it wasn't.
It seems Greek PM Tsipras' and Greek FM Varoufakis' plan all along was to bring the Euro-Zone to the edge, only to get creditors to back down at the last minute, afraid of Greece. However, the German-led Eurogroup contingent has stayed firm in their expectations from Athens, and not wanting to face the July 5 referendum - merely a negotiating tactic - the Greek government is now ready to change its tune.
The sticking point may be over the timing of the letter. Because the bailout expired at midnight Tuesday, the "offer" he is accepting is technically no longer on the table, as it was an extension. Accordingly, it doesn't seem likely that the Eurogroup will accept the offer from Tsipras; just yesterday German Chancellor Angela Merkel said the German government couldn't be consulted on a new proposal before the referendum. This may fall into that category, and the Eurogroup may press Greece to go through with it anyway - which may be why EURUSD is slipping back this morning.
The other pair that is giving an indication that the USDOLLAR Index may be ready to turn higher is USDCAD, which is notorious for being a step ahead of the USDOLLAR Index (similar to how USDCHF or GBPUSD are sensitive to developments in EURUSD more so than other pairs due to their regional proximity, USDCAD tends to be the first mover when it comes to things USD-centric).
See the above video for technical considerations in EURUSD, GBPUSD, USDCAD, and the USDOLLAR Index.
--- Written by Christopher Vecchio, Currency Strategist
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