Greece is fixed. At least that was the feeling after a marathon meeting on Sunday. Eurozone leaders worked until the early hours on the morning of Monday and agreed to yet another bailout package for the much-indebted country.
This time, the value of the bailout that Greece needs is about €80billion Euros, and even now, three days after the agreement, capital control is still in place.
The reason for that comes from the fact that any deal or agreement needs to be pushed through parliaments in some Eurozone countries and this takes time. Moreover, the ECB (European Central Bank) did not increase the ELA (Emergency Liquidity Assistance) yet. Without that Greek banks are forced to stay on holiday for a little longer.
It will be interesting to see what the President of the ECB, Mr. Draghi, will say on Thursday when the bank is having its interest rate decision and press conference. Reporters will try to find out as much information as possible from him regarding negotiation outcomes and ELA levels.
Due to the Greek saga, other news was simply “not important” enough for currency markets. In reality, we had some pretty poor releases out of the United States. Retail Sales were released at an extremely low level, showing that the US consumer was cautious with spending in June.
The problem is that without consumer spending increasing, there is no way the Federal Reserve is going to hike rates. Even if they do hike under low spend conditions, it will be limited and temporary. At this point in time, all traders need is a poor jobs report and any chance of a hike is gone.
Currency traders can be thankful for the ongoing Greek story as it brought volatility into a market that is in summer trading conditions. Ranges are getting smaller and smaller.
Last week’s market was rallying on news that a Greek deal will be signed and Monday, by the time the deal was delivered, the EURUSD sold aggressively from the 1.12 area all the way to below 1.10. It was a classic buy the news sell the fact story on the EURUSD. I am expecting the 1.10 area to act as solid support, and a move back to around 1.14 should start at that point.
This week we’ll see Mrs. Yellen, Chairwoman of the Federal Reserve of the United States, giving a semiannual testimony, and this is what will move markets for the rest of the week.
As for other currencies, the Bank of Canada is due to announce its monetary policy and funnily enough economies are being split on a 50-50 ratio when it comes to a rate cut to be delivered. However, with the Iranian deal out of the way now, it is difficult to believe we will see a rate cut.
All in all, with Greece being fixed, we’re looking for normal trading conditions and factors to influence movements from now on.
Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.
