Forex Trading Library

The crisis in Greece is just getting started

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Bailout talks between the leftwing government and foreign lenders fail to save the country from a default. Greece closed its banks and imposed capital controls (which are likely to last for months) on Sunday, while people will be able to withdraw only 60 euro limit cash per day (cash machines will reopen on Tuesday). After the PM Alexis Tripras declared that “the more calmly we deal with difficulties, the sooner we can overcome them and the milder their consequences will be”, he also called for a referendum on the 5th of July on its international creditor’s terms for a new bailout (asking also for an extension of Greece’s existing bailout until after the July 5 vote.).

The EURUSD quotation opened the market with a significant negative gap which brought the price down to 1.0954. The gap may be covered, but not fully, while the major tendency is descending. USDJPY also had a strong reaction as the yen, which tends to gain at times of financial stress, strengthened against the dollar to a one-month high. Currently, the price keeps falling and during the day me easily broke the support level at 122.00.

The price of EURCHF is currently trading at 1.0330 after the market opened with a negative gap that lead the quotation down to 1.0312. Also, the consequences of those decisions are visible on the graph of the AUDUSD and NZDUSD, which marked negative gaps.

The price of gold opened the week with a positive gap (possible a breakaway one), as expected, which lead the price at 1188 dollars per ounce. Once the price overcomes again the local maximum, we can expect the quotation to advance up to 1195 and 1200. The price of both the Brent and WTI oil began the day with negative gaps (losing more than one dollar) after Greece imposed capital controls as lenders refused to extend the country’s bailout. In this situation too, the decreasing trend is expected to continue.

The international political scene also had responded, as U.S. President Barack Obama called for the implication of German Chancellor Angela Merkel and senior U.S. officials, including Treasury Secretary Jack Lew, to help Greece and the IMF to come to an understanding. Korea’s finance ministry and central bank are also discussing the situation, while Japan’s top government spokesman Yoshihide Suga declared that is closing monitoring the situation.

New York Fed President William Dudley made an important announcement concerning the monetary policy. He believes a September interest rate hike is “very much in play” if the economy continues to expand, but it is also highly recommended to keep in mind the December meeting which can as well start the tightening policy.

Indexes on the Japanese and Chinese markets are aggressively losing ground because of Greece, but also because of surprising easing in monetary policy which determined investors to stay away from these markets. The People’s Bank of China cut lending rates for the fourth time since November to 4.85% and trimmed the amount of cash that some banks must hold as reserves by 50 basis points.

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