Risk Aversion As Greek Talks Break Down Feb. 17, 2015
No Agreement On Greek Bailout, The Game Of Chicken Continues
To be honest I have to say I was optimistic thinking of what the outcome of the EU/Greek talks yesterday. I figured they would at least find some common ground even if there wasnt a full resolution. However that wasnt the case. The EU seems to want to look flexible while holding ground on most of the bailout terms. In essence an extension of the bailout which Greece can not have, and why would they accept it? Sure if there was any sign of improvement in Greece over the last few years then there would be reason to be flexible but considering the bailout terms have only made the situation worse they need to try something different. Why continue the same path if it dont produce positive changes?
Again its still a toss up as to what the next moves from either side would be however considering what the new Greek government feels is its mandate, the next move that I would be considering is a referendum on staying in the Euro. Part of the mandate they feel they have is to stay within the Euro, are doing their best to do so, and drive a hard bargain with Brussels. However if they are going to get through this by leaving the Euro, they will need the backing of the people. If the people decide to stay in the Euro then it would be easier to be flexible on the terms of extending the bailout. On top of that just the announcement of the referendum will most likely send some shock waves through the markets even if its not what it was when the first referendum was announced a few years ago. Testing the will of the Greeks to fight for them self (considering going back to the Drachma to do so) as well as testing market reaction to the potential of Greece leaving the Euro seems to be the next logical move for me. And the saga continues
EUR/USD Makes Clean Push Down
I will be bias for the next push down on the EUR/USD today but I would feel better if this push wasnt based on the Greek deal break down. Meaning if there are any positive announcements today then this will retrace. Having said that the probability of things remaining quiet while the parties think of their next move is higher. The first level I will look to short is up at 1.1357 at the Asian highs but they could also test up to 1.1379 as well. The best level to consider a long is at 1.1326 preferably seeing a test during Asia giving confluence of the Asian lows and a wider range.
GBP/USD Push Down On Risk Aversion
The conviction during the Asian session on the GBP/USD did prove to be false and got the extra push off the Greek deal falling apart. I will be bias for the short here today as well with the best level at 1.5379 The daily level just below may hold but having the confluence of the 80 psych level seems more probable at this point. I will be open for the long at yesterdays lows but will need to see they refuse to let it pass.
EUR/JPY Runs Down With Risk
The push on the EUR/JPY can be looked at in two ways considering how it made it. I am never satisfied with a continued push after two days of chop so I will be treating this as a first rather than second push. I will be bias for the short while still open for the long with a stop run to the lows. The higher probability is for the break down in either case but if they are to make the run down again its looking like it will be a backside entry after conviction below the lows. Otherwise the best level for the short if the lows hold are up at the Asian highs more than 50 pips away. The best level for a backside entry will be at 134.04
Forex News Today
The calendar starts off with UK Inflation data. The headline CPI figures are expecting a drop close to zero and should be pretty close but if they do drop below then the GBP should weaken further. Otherwise if there is a small disappointment there but larger one on the PPI figures the move should be roughly the same. If by chance they do surprise to the upside then GBP strength is in order but may be take up mostly in the EUR/GBP. Later is German and Euro Zone ZEW Economic Sentiment both expecting improvements. With the situation in Ukraine cooling some what there is good reason to at least think things will improve in Europe so I dont expect much of a miss here.
The US has a Fed member speech to keep an eye on but I have doubts Plosser will drop any tape bombs at this time.
Lastly during Asia tomorrow the BOJ has a press conference and considering previous statements I expect them to reiterate there wont be an expansion of QE. However they may be getting concerned of a strengthening Yen and do some verbal intervention to slow that down.
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