Trade Call: Long USD/CHF

Greece Extends Lifeline

Eurozone finance ministers agreed to extend Greece’s bailout deal for another four months, provided it came up with a list of reforms by this week. Under the deal, Greece will still live under the EU/IMF bailout which Greek Prime Minister Alex Tsipras had pledged to scrap.

Greeks reacted with relief that the deal averted a banking crisis which fellow eurozone member Ireland said could have erupted in the coming week.

Finance Minister Yanis Varoufakis said the reform promises would be ready and submitted to Greece's EU and IMF partners in good time. Another government official said the reforms would include a crackdown on tax evasion and corruption.

The Brussels deal opens the possibility of lowering a target for the Greek primary budget surplus, which excludes debt repayments, freeing up some funds to help ease the effects of 25 percent unemployment and pension cuts. It also avoids some language which has inflamed many Greeks, angered by four years of austerity demanded by foreign creditors.

Friday's agreement merely buys time for Greece to seek a long-term deal with the Eurogroup. Euro zone members Ireland and Portugal have already exited their bailouts, but Greece faces yet another program - on top of bailouts in 2010 and 2011 totaling 240 billion euros - when the extension expires.

Elsewhere in Japan, analysts expect the central bank to embark on more stimulus later this year, topping up its latest round launched in October, to support economic growth and ensure rises in inflation.

Seeking to wrench the country out of nearly two decades of deflation, BOJ Governor Haruhiko Kuroda unleashed an unprecedented burst of monetary stimulus in April 2013, saying the aim was to achieve 2 percent inflation in roughly two years. However, he declared in January last month that the time-frame was not set in stone and noted that a steep slide in oil prices had derailed earlier expectations.

A Reuters Corporate Survey, conducted between 2nd February and 17th February, showed that while most firms want consumer inflation to be higher than the current 0.5 percent, an overwhelming 80% were content with levels of less than 2 percent.

Just over 70 percent of companies said they saw no need for additional easing despite the plunge in oil prices - a figure consistent with previous survey results in recent months.

Bold monetary stimulus over the past two years has weakened the yen substantially and many respondents said any further softening would drive up import costs.

In addition to fears of further yen weakness, corporate managers in the poll also wrote that a 2 percent inflation goal was unrealistic and unnecessary, and that monetary policy had done all that it could do.

Last week, Bank of Japan chief Haruhiko Kuroda said he saw no need for stimulus but added he would not hesitate to ease again if circumstances warranted. The 60 percent slide in oil prices between June 2014 and January 2015 has also boosted hopes that Japanese companies will reap some windfall profits as their hefty fuel import costs drop.

Top News This Week

Canada: Core CPI m/m. Thursday, 26th February, 9.30pm.
I expect figures to come in at 0.1% (previous figure was -0.3%).

USA: CPI m/m. Thursday. 26th February, 9.30pm.
I expect figures to come in at -0.6% (previous figure was -0.4%).

USA: Prelim GDP q/q. Friday, 27th February, 9.30pm.
I expect figures to come in above 2% (previous figure was 2.6%).

Trade Call

Long USD/CHF 0.9430

On the H1 chart, USD/CHF has fallen into a range after moving in a consistent uptrend from 6th February, clearing over 360 pips to touch a high of 0.9534 on 20th February.

I expect the uptrend to continue this week. Hence, an entry is taken at 0.9430 with a stop loss of 60 pips placed below the last low. We will have two targets on this trade, exiting the first position at 0.9490 and the second one at 0.9550.

Entry Price = 0.9430
Stop Loss = 0.9370
1st Profit = 0.9490
2nd Profit = 0.9550


Other posts by Mario Singh: