Greece Closer to Default, Spanish Political Shake Up May 26, 2015
10 Days Until Greek Default As Spain Anti Austerity Party Gains Seats
There could be some more trouble brewing for the Euro in the near future. Yes of course this has been stewing for quite some time but if Greece does default on June 5th then the big trouble will have just began as the real world consequences come to bear of what many have called the central bank largess. The thought process that allows them to think they will be able to control a Greek exit from the Euro will be tested to say the least.
Most concerning was a vote taken by the Greek parliament over the weekend where the extreme leftists put the default to a vote. I see that some view this as a splinter in the Syriza party but Im not so sure. The “defaulters” only lost by 20 votes and if the splinter they are referring to gets much more skewed to the default side the test will come sooner rather than later. Having said that it will become a moot point in the next ten days if they cant come to an agreement allowing the current circle jerk to continue. Of which dont seem likely but wouldnt surprise me either.
Then we have the Spanish vote coming in over the weekend hitting the ruling party pretty hard. The anti austerity Pademos party gained substantially although not to the likes of what we saw in Greece when it elected Syriza. However it seems like it will only be a matter of time before the Spaniards go full Greek.
EUR/USD Weakness Starts Early
The weekend events have seemed to have gotten out with the Euro weak across the board this morning. We will see what happens during London this afternoon but this type of Asian conviction shouldnt be ignored. I will be slightly bias for the short today looking to see the lows yesterday get rejected before looking for an entry at 1.0958 during London. Otherwise they may want to run stops to the Asian highs so I will be open for the short there as well but more cautious since that will be a sign of the conviction being false. I will only be open for a long at the 1.0930 level if there is enough price action showing they wont let it pass.
GBP/USD Weak With USD Strength
As with the EU the GBP/USD has been beat down early this morning showing hourly conviction below last weeks lows. As usual I am skeptical and will need to see it hold during London but it does seem rather strong with a 40+ pip move during Asia. The 1.5460 level needs to show the conviction is true. If not and there is conviction above the Asian highs of 1.5474 then a test to yesterdays highs at 1.5503 is more probable.
EUR/JPY Weak But Held Up By UJ
The Euro weakness has pushed the EUR/JPY with it but the rise in the USD/JPY is holding it up for now. As long as the EU conviction holds this pair should keep tracking it even if the move is limited by USD strength against the Yen. Otherwise it is hitting a significant daily level at 133.13 that has potential to keep them from breaking it down this morning. At this point the best short will be at the Asian highs of 133.49 since the conviction is questionable. Otherwise if they do manage to push it below 133.10 with conviction then 133.25 will be where I look for an entry short.
Forex News Today
The calendar is slow with nothing during London but the potential tape bomb.
The US starts off with Durable Goods data with revised figures to the upside for the last release and recent housing data improved this has a much better chance of surprising to the upside gaining the USD more strength. Having said that there seems to be more of a disconnect between these releases so there is the slight chance of a disappointment. They also have Services PMI, CB Consumer Confidence and New Home Sales. The PMI data shouldnt do much unless it has a big miss and if Durable Goods improves substantially they will expect New Home Sales to be better as well. However it seems the bar is set high on the housing data so a small disappointment wouldnt surprise me. Later is a Fed member speech to watch out for but I dont expect much.
Asian session traders have the BOJ Meeting Minutes to keep an eye on along with a RBA Assistant Governor speech that could get the Aussie moving if they hint about rates.
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