After two failed attempts, yesterday was parliament’s last chance to elect Dimas as president before being forced into an early election. Having failed yet again, the country will be headed back to the polls as early as January 25. An election puts all sorts of doubt on the future of the bailout agreement given anti-austerity party Syriza is currently leading the polls. While Greek equities slumped, the reaction in the euro and the rest of the region wasn’t quite as bad. Potentially markets had already priced this in but I would still remain cautious around Greece. EUR/USD printed a new low of $1.2143 and remains quite vulnerable at the moment. This was the pair’s lowest level since July 2012. That same month the pair traded down to $1.2043 and that’s potentially a near term target for the pair.
Greenback remains resilient
Apart from Greece which slumped significantly, markets were generally choppy elsewhere with USD strength remaining a key theme. In fact, the AUD was one of the few currencies that managed to regain some ground against the greenback and that was mainly due to the strength that was coming through from China yesterday. AUD/USD traded as high as $0.8163 but has since started drifting again and I suspect it’ll continue to knock on the $0.8100 support. Meanwhile USD/JPY is nudging higher, back towards ¥121.00, and is retesting last week’s highs at the moment. The Nikkei was a surprise underperformer yesterday and could be in for a bounce today.
Flat start for ASX 200
Ahead of the open we are calling the ASX 200 a touch firmer at 5480. As of yesterday’s close, the market is up 2.3% for the calendar year. We saw incredible momentum yesterday and it’ll be interesting to see if this can continue given the uncertainty presented by Greece. China was a key driver of the gains yesterday and given it reversed the majority of its gains, this could present some challenges for the region. The bounce in iron ore prices might help the materials names continue their strength from yesterday. However, if China’s rally stalls and if this impacts iron ore futures then it won’t be long before we see this reversed. Oil’s brief recovery failed to keep going and this will put energy names under pressure. In the banking space, CBA traded above $86 yesterday and is at fresh record highs. Investors will feel uneasy about pushing the stock much higher from these levels, perhaps buying the dips will be a preferred strategy.