Euro choppy on Greece concerns

The euro has been the highlight of trade today with investors reacting to the latest headline on Greece.

Euro
Source: Bloomberg

The ECB decided to lift the waiver on Greek government debt as collateral. This effectively means banks cannot use Greek government debt as collateral for loans. Markets interpreted this as a fresh concern after a period of optimism with the ECB going as far as saying it can no longer assume bailout negotiations will be concluded successfully. Given Syriza was voted in to make some changes and take an aggressive stance, many now fear if the new government yields then this will not be taken easily by the Greek population.

Additionally the ECB announcement is likely to result in a run on the banks. With this in mind, the euro’s recent run came to a swift end. EUR/USD had ascended to $1.1534 this week and was looking like it was in for a near term squeeze higher. This move had also seen EUR/USD break a downtrend resistance line which had been in place since December. This line can be drawn from highs at $1.2561 and capped any recovery since then. The drop in EUR/USD overnight has seen the pair retest this previous downtrend early in Asia. Should we not see a bounce off $1.1300 then renewed weakness could take the pair down to January lows ($1.1097) yet again.

 

Click to enlarge

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts

Find out more about