The President of Cyprus must be the most unpopular person in Cyprus right now. None of the members of parliament voted Yeh for the proposed levies, including 19 members of Nico Anastasiades party who abstained from voting, giving Anastasiades some semblance of “support” instead of embarrassing him. On the streets of Cyprus, ATM lines are extending as banks remain closed until Thursday, and this is the only way they are able to withdraw money should the levies come into full force. Nobody likes to see their savings dwindle, and now your average Joe on the street may be looking at a smaller bank account figure without spending any of the money that has disappeared. As you can imagine, protests are occurring in capital Nicosia, the only thing we’ve yet seen is mob burning the effigies of EU group leaders and Anastasiades. Advise to Anastasiades, get more bodyguards.
Market seems to share the relieve of Cypriot savers when the voting result was announced. S&P 500 rallied strongly, recovering part some of the losses during early US trading session. However, this hypothesis does not explain the strong selling prior to the vote, as such verdict is still out whether the rally post voting results is due to genuine bullish sentiments (as everybody hate the levies) or simply a technical rebound from the strong selling earlier. Looking at Monday’s reaction – price rallied strongly after it was made known just before US trading hour that the decision to vote has been postponed. The rally happened after the initial pullback that saw price move back to 1,545 from the 1,535 Asian low, and suggest that the move from 1,545 to 1,555 is highly influenced by the delay in accepting levies, and lends weight to the hypothesis mentioned earlier.
One possible explanation for the hypothesis is that market is holding out for a better resolution than the current one, and as long as Cyprus refuse to bite the bullet, there remains a chance – however unlikely – that EU may relent. Nonetheless, dragging the Cyprus situation is never good and the financial system remains fragile if no bailout funds are dispersed. As such, we do not see bullish momentum accelerate higher, but rather only recovering the initial losses. It is important to note that yesterday price action is entirely within Monday’s trading range. Yesterday’s sell off failed to test the recent bottom, and suggest that bearish momentum may be on hold while both bulls and bears wait for further clarification. We could see volatility petering out as we approach the Thursday dateline.
Daily Chart is still bullish though, with the recent lows unable to push below Feb highs. Though Stochastic readings are trending lower, price may still find support below Feb highs in the form of Senkou Span A and the Kijuu-Sen. Looking from the daily chart, Monday’s fall is far from spectacular and one would be hard pressed to identify if some strong bearish news have occurred if all the information he had was this chart. Without knowing more, one may simply interpret the fall on Monday as a technical pullback from Mar rally. Moving forward, US investors have the FOMC decision tonight which will most probably give clarity on the exit points (if any) on current easing efforts. This may turn attention away from Cyprus, decreasing its relevance and reducing the volatility contribution.
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