So the Greeks voted “No” to the austerity measured proposed by the Eurozone on their referendum yesterday and now we’re really treading uncharted waters. This is an important event in the history of the Euro area as never before there has been a referendum on the economic policy of a member state, let alone one where the proposed changes and reforms were rejected by the people.
Currency markets have opened sharply lower on the back of the 61% rejection vote in Greece and the Euro traded very quickly down to the 1.1000 area, a reaction that was pretty much expected as the Single currency demonstrated a similar performance when the referendum was announced last time. What lies ahead though is hard to predict but it seems certain that volatility and uncertainty will be part of this week’s price action.
With European policymakers scrambling to react to the Greek vote scheduling Eurogroup meetings to assess what this development means, how it can affect the region in general and in what way they should react the Euro will remain fragile. The 1.1100 level appears as the technical barrier at this time and while it remains trading below that then a further retreat seems more likely, the first support area lies around the 1.1000 level but if that gives then the Single currency will be headed towards the 1.0900 area.
Cable started the week on the wrong foot on the back of the Greek vote and opened slightly lower on Sunday but overnight the UK currency managed to build up some momentum higher reaching the 1.5600 area. The Cable has benefited overnight from Euro’s weakness as traders were looking to offload Euros and trade them for Pounds but the general bias in the currency is bearish. We could see further decline from the Cable this morning with the 1.5500 area being the first target.
The economic calendar doesn’t offer too many opportunities today as the most market-moving event is expect at 14.00 GMT with the release of the ISM Non-Manufacturing index from the US. A bullish reading as expected would allow the Dollar to appreciate further against its European peers. Other than that we should keep an eye for developments in the Euro area and reactions to the Greek referendum vote.
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