Euro Extends Breakdown, Aussie Tests 0.98 After Westpac Confidence

Last-ditch efforts to form a Greek government failed and an election call is imminent. The move was well-anticipated but the euro fell hard, dropping to 1.2730. Japans tertiary index fell, while Australia Westpac consumer confidence rose but remained below Octobers level. There 6 charts in tonights Premium Intermarket Insights, with new ideas in EURUSD and a change of focus in US crude oil. AUDUSD, USDCAD and gold trades remain in progress. See more below

The market not likely to be caught off guard by the failure of Greek political talks but the announcement pushed the euro over the edge, which today was at 1.2830. It was a steady slide a full cent lower from there.

US economic data was inconsistent. April retail sales rose 0.1% compared to +0.2% expected and CPI was in-line at 2.3%. The market focused on upbeat readings on the Empire Fed and NAHB home builders index. These numbers werent good enough to spur optimism about the recovery but were good enough to beat back QE3 expectations and spark a dollar rally.

The broad USD gains were also fuelled by a technical breakout in the Dollar Index and commodity-price drops. Gold and oil fell to a 2012 lows while copper fell to the lowest since January.

European bond markets remain in shambles amidst a growing sense that a Greek eurozone exit is inevitable. Japan March machine orders 2.8% vs a median forecast of -3.2%, while the Tertiary Index was -0.6% m/m vs unchanged in Feb.

Australia May Westpac consumer confidence +0.8% m/m to 95.3, remaining below Octobers level. Westpac expects the RBA rate cut to be brought forward to June.

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-AB