A turbulent mood fills the air in Greece, when the Government in the early hours approved austerity measures laid down by its creditors in return for more bailout assistance. The €86 Billion deal would go through ECB approval overseeing the Bank of Greece releasing money through it’s ELA (Emergency Liquidity Assistance) program – read full article here
Greek MPs approved tough economic measures required to enable an €86bn eurozone bailout deal to go ahead. Two hundred and twenty nine lawmakers voted Yes, 64 voted No and six abstained. Half of the No votes came from the governing Syriza party. The austerity measures included :-
- VAT changes including a top rate of 23% to take in processed food and restaurants and; a 13% rate to cover fresh food, energy bills, water and hotel stays; and a 6% rate for medicines and books
- The abolition of the VAT discount of 30% for Greek islands
- A corporation tax rise from 26% to 29% for small companies
- A luxury tax rise on big cars, boats and swimming pools
- And end to early retirement by 2022 and a retirement age increase to 67
Equity markets have rallied off the back of the news, with all the European Indices well up over 1% . The DAX has risen almost 200 points on the day from the lows of 11524 hitting a high so far of 11721.
Looking at a Daily chart of the DAX, one can see price is now above its 100 day moving average (blue line in the chart below). Bulls will ideally want price to close above this level today, with the next target in focus being the upwards trendline which was broken back at the beginning of June. This line was subsequently retested by Bulls a few weeks later, but alas to no avail with price falling back again. Now that the clouds of uncertainty regarding Greece’s financial peril has cleared somewhat, investors are jumping back on the bangwagon of the ECB’s massive QE bond-buying program running through to September next year.
(click to enlarge)
Looking at an Hourly chart of the DAX below one can see price is still above its 100 & 200 MA’s (blue and green lines), keeping the bullish bias firmly in place. Price meandered up and down yesterday between the two Key zones – 11606/11595 + 11467/11460. Price broke through the 11606/11595 zone in trading this morning, with bears retesting the zone before bulls once again regained control pushing price back higher.
(click to enlarge)
CONCLUSION – BULLISH
Investors and traders alike will be waiting for what ECB President Mario Draghi has to say over the Greek situation at a press conference in Frankfurt later today at 13:30 GMT.
For Bulls, price needs to stay above the 11606/11595 intraday, with the next target of focus being the 11776/11750 zone. Risk can be defined against these levels and also any pullbacks in price to the 100&200 MA’s on the 5 minute timeframe.
For bears, expect to see some shorting into the 11776/11750 zone on any rallies higher. Ideally price needs to take out the 11606/11595 zone for bears to start entering the marketplace with any confidence.
Bearish targets :-
- 11606/11595 (Key zone + near Daily R1 Pivot 11608)
- 11543 (Daily Pivot)
- 11438 (Extension of Daily range – 22 day average is 283 pips)
Bullish targets :-
- 11776/11750 (Key zone)
- 11807 (Extension of Daily range)
- 11860 (Bottom of trendline from Oct 2014 – see Daily chart above)