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Greece, a ticking time bomb with a potential deadline in summer

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If you were wondering why the german index pointed down to 11664 points on Friday, it may be because of the IMF meetings and the ECB’s President speech. Both of the events mainly treated the subject of Greece. Mario Draghi launched a call to the Greek officials saying that there is an urgent need to strike a bailout deal as soon as possible. For now the situation is kept under control because of the ELA program, but it cannot go on infinite. ELA is a temporary measure to give the banks liquidity and it may have a limit until summer.

The ECB is preparing a 240 billion euro bailout program for which Greece has to prepare a consistent reform plan with emphasis on “growth, fairness, fiscal sustainability and financial stability.” The next meeting of euro area finance ministers is due on 24th of April and unfortunately, the Dutch Finance Minister and Eurogroup President Jeroen Dijsselbloem firmly believes that by then, Greece won’t reach a deal.

In an attempt to maintain some positive premises, Mario Draghi said he was confident that Greece will overcome this situation as the ECB doesn’t want it out of the euro area. Maybe, if the current economic situation would be different, a Grexit would be managed easier, but with a record minimum of the interest rate at 0.05% investors get no reason to stay with the Euro anymore.

The german index DAX is visibly influenced by this situation, while the euro currency is still sitting on macroeconomic terms which help the currency stay in the 1.0750 area. The actual correction of the EURUSD may soon prove its fragility and probably the 1.0700 support level is a good indicator.

The second most significant event of the financial markets comes from China. The world’s second biggest economy cuts again the reserve requirement ratio for all banks by 100 basis points to 18.5 percent, operative from April 20. The decision was broadly expected by market participants, but the size of the measure is exceeding the market expectations. Stock markets in China and Japan already reflect the stimulative Chinese measure and in the long term may add this factor to the list of fundamental agents that are sustaining the rising trend of the capital markets.

The oil quotations have an incredible evolution lately. We have been witnessing a rapid ascending trend last week, which brought the price of WTI and Brent oil to important resistance areas. A possible consolidation above these resistance lines could lay the foundation for more extensive corrections. Data from Baker Hughes showed on Friday that U.S. oil drilling rigs fell to the lowest since 2010, pointing to lower supply later in the year. Adding to this situation the China’s strong stimulative monetary policy, we  get the fundamental support for the temporary (for the moment) ascending trend of the oil price.

The WTI oil is currently trading at 58.00 dollars where the 59.55 high marking an important resistance area. The Brent price is staying in the 62.93 – 64.85 range, near the 65 dollars relevant resistance zone.

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