EURO Volatility Expected Ahead Of Greek Meeting Feb 16, 2015
Meeting For Greek Deal Is Today, Who Will Give?
At this point I am not going to make assumptions on what will happen at this meeting between the EU and Greece. What would be best is both parties give some ground and give Greece a chance to stay in the Euro but for several reasons both the European Union and Greece both have good reason to hold out for full concession. If thats the case then the Greek exit would ultimately be the end and the repercussions arent good in any case, for the Euro or Greece. The best article I have seen as of yet looks at the situation from a game theory perspective. The summary of the article is below, essentially seeing any out come as a lose- lose scenario.
Our fear is that the markets, inured by previous bailouts, expect the Greeks to cave. And, that may be the outcome. We view a Greek exit and market crisis as a low probability/high impact event. Such circumstances are difficult for markets to discount adequately because the bad outcome is considered so awful that the markets simply assume it can’t happen. We have tried to show in this report that rational behavior based on misperception can lead to bad outcomes.
We do fear that a Greek exit will have unexpected side effects that are not evident to policymakers. The fact that EU officials seem to believe that Greece can exit the Eurozone with minimal consequences is probably wrong. Even if the Bank of Greece implements capital controls to slow the outflow of deposits, the high level of corruption almost makes it certain that money will still flow out of the banking system, putting it at risk. At the same time, EU policymakers are assuming that contagion will not occur, which may not be accurate.
EUR/USD Tests Last Weeks Highs In First Hour
The wild move on the EUR/USD at the open just shows how volatile things could get today depending on the Greek discussions. At this point the safest position would be to stay away from trading Euro crosses. Having said that if I can manage to catch a trade from either end of last Fridays range I will be happy to trade this range since the probability of it breaking before the announcement later today is low.
GBP/USD Showing Potential False Conviction
As members know, the conviction seen without a financial center open for one of the currencies in a pair has a much better chance of being a fake out. This is the case for the GBP/USD today. With no clear direction I will be waiting for this to hold during the London session and trade it accordingly, either waiting for the backside entry set up around 1.5420 or the Asian lows. Otherwise I will be open for a clear set up short from the Asian highs with a low risk entry.
EUR/JPY Showing Less Potential For Second Push
I am still bias for the next push down on the EUR/JPY but the probability has lessened somewhat since they couldnt do it Friday last week. If they cant show some conviction during the London session then it will most likely hold this range until we get some news on Greece. Im open for an early set up short at the Asian highs and any long will need a nice set up showing they have no desire to make the next push.
Forex News Today
There isnt any higher impact events today so they will likely be pushing on comments coming from the Greek meeting. I do expect negotiations to go on late into the day but we may get briefings along the way so I wont be holding any trades for extended runs just in case.
The US is closed for Presidents Day so the NY session could be crazy if thats when they announce the results of the deal/no deal
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