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Risk Appetite As Greeks Appear To Fold Feb. 4, 2015

February 04
02:01 2015

Removal Of The “Debt Write Down” in Greek Proposal Sends Risk Soaring

It seems for now that the markets took the change in language in the Greek debt proposals have shown the new Greek government has lost any potential leverage in negotiations and will eventually be stuck with the status quo if they want to remain in the European Union. I have to admit that if that does happen and they end up muddling through with the same forced plan from the Troika, it will be a smack in the face for democracy around the world. I dont think its over yet since there is still the chance that they go back to the Drachma but in reality that was not really in the plan when the new government was elected. However at this point its the only option left if they are to ever get from underneath the foot of their creditors and have a new beginning.

What I will be watching for is a warming of Greece to the Russian proposal put forward last weekend because if they are to leave the Euro they are still going to need some help. What a great opportunity for Russia to step in and be the super hero to the Greeks. How ironic would it be if we see Russia effectively gain a foothold in Europe just as the potential European foothold into Russia via Ukraine was turned back at the door. I have to admit that would and should be a hard choice for the new Greek government. I have my doubts they would actually get into bed with Putin but if I were then I would surely be entertaining the idea to show how serious the situation is within Greece. The coming days and weeks will be interesting but for now this risk appetite will likely continue.

EUR/USD Pushes 220 Pips From Days Lows

As I said above I do expect this ramp up on the EUR/USD to continue but the question is where from? In these situations of exploded price the best course of action is to remain open on direction for a trade. They could easily pull back trying to squeeze weak longs before a push up or they could just continue the risk appetite push up. If they are going to ramp it up I would expect a test of 1.1448 during the Asian session and see it hold for a test and trap during the London session. Any conviction below during Asia is likely a fake out so at that point the Asian lows are still valid with a low risk entry. Otherwise I will also be open for the short from 1.1489.

EURUSD 1hr chart 2-4-2015

GBP/USD Follows Push Up On Risk

The push on the GBP/USD was somewhat slower due to the strong Euro on the news. As long as the risk appetite persists this pair should benefit as well even if the moves are smaller as the EUR/GBP moves up as well. As with the EU its best to remain open on such large moves and while this pair has a slightly larger probability of a pullback it will most likely track up if the EU does. The best level I see for a long is down at 1.5126 but if they manage to hold the current Asian lows at 1.5138 and leave the Asian box closer to the highs I will look for a set up there during London first. The 1.5167 is valid for a short but looking to the left its a weaker level that was most likely held taking profits at the end of the day yesterday. Otherwise it will most likely test the highs or break if they cant hold it below 1.5167

GBPUSD 1hr chart 2-4-2015

EUR/JPY Move Extends On USD Weakness

It would seem that the full blown risk on scenario was in full swing considering the move on the EUR/JPY yesterday. Extending well beyond the ADR running around 280 pips. Again rish is most likely to continue pushing this pair upward and by the looks of things they are starting during the Asian session. I did manage to get up early and catch the long from 134.81 this morning and waiting for this candle close to show some conviction to hold for a run to around 135.80. If I weren’t already in long I would still want to see this conviction and look for a backside entry. The USD/JPY is looking in my favor as well so even if the EJ dont and the UJ does show conviction I will hold and give it a chance. Once it moves 65 pips in my favor I will protect 40 and let her run. The only way I would be open for a short is to see both EJ and UJ lose all sign of conviction in the next 19 minutes.

Update: The conviction has held on both EJ and UJ so I will hold. I would be happier to see more on the EJ but the UJ should help it.

EURJPY 1hr chart 2-4-2015


Forex News Today

The calendar is busy today with Services PMI data from much of the Euro Zone. Expectations are mostly flat with slight improvements expected from Spain and Italy. As long as they are close I expect the Greek news will trump any small disappointments barring a tape bomb of course. Otherwise in the absence of any Greek news a miss to the upside should cause these moves to keep pushing.

UK Services PMI is also expected to improve so as long as it dont disappoint big then should help a GU push up as well.

The US has ADP Non Farm expected at a low 225k but with the employment data being of less consequence these days I only expect a miss to give them reason to manipulate but should I still be in my EJ long I wont be holding over night.Later there is ISM Non Mfg. PMI expected to drop slightly but without a big miss shouldn’t do much either. There is also another Fed member speech and with the current rhetoric spewing US economy strength the higher probability is this will continue.

Happy Trading




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