Interesting price action but lack of direction was the theme of the currency markets over the past 24 hours as the major currency pairs were in a waiting stance ahead of the key developments starting today. The focus is as always on Greece when it comes to the European currencies and any news, positive or otherwise, take their toll on the Euro while the Pound closely monitors its peer’s price action.
The latest part of the Greek issue was played yesterday when the Greek government has revealed the details of their proposal to the European Stability Mechanism requesting another loan for the next 3 years. Their request details a number of key structural reforms to be undertaken immediately after the program is approved, a development that shows that they are committing in staying in the Eurozone.
As a result the Euro benefited from this bullish development and came off its 1.1000 lows to trade back above the 1.1100 barrier this morning. The bias is bullish at this time but it all hinges on whether the proposed plan will pass from the Greek Parliament, remember that the far left wing of the ruling party opposes many of the plans’ ideas, and after that whether it will be considered appropriate from their European creditors. If so, next stop for the Euro will be the 1.1200 area.
The Cable ended the day pretty much unchanged side-trading below the 1.5400 barrier looking for a new spark to provide direction and momentum. The BoE decision on the key interest rate passed without any changes and the Pound remained flat against the US Dollar, the key level to watch though is the 1.5420 area as it is considered the short-term resistance for the currency pair. From a technical standpoint, a successful break above this area should allow the Cable to breathe a bit easier but the bias remains bearish so we need to be careful not to overcommit into any trades.
Moreover, as a general note it would be wise to try to be as cash-neutral as possible ahead of the weekend as the Greek drama will play out over the next 2 days. The Eurozone will decide whether Greece’s proposal is enough to keep it within the union otherwise time is very limited for any counter-proposals and Greece could be very well facing a potential Grexit if Monday comes and no solution has been found. As such volatility could be very high and the markets might open with considerable price gaps on Sunday evening disregarding stop placements so caution is advised.
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