The Greek Referendum Predictions and EURUSD 2015

The Greek Referendum

Following Alexis Tsipras, the Greek Prime Minister (PM) to announce a referendum on Friday night and let the Greek nation decide its fate led to moderate losses in most EUR pairs and crosses in the Forex market. The referendum was announced after months of fruitless negotiations with its creditors (‘the Institutions). We have revealed Europe has demanded a referendum or Tsipras resignation in return for a deal several weeks ago but the Greek PM has refused.

As the Greece deadline is on 30 June (Tuesday) when it is due to make its payment to the International Monetary Fund (IMF), if a deal was not struck over the weekend the Greece would have defaulted on its debts. We were expecting Tspiras to resign in order to buy time but calling out for a referendum was a clever approach. Tsipras knows the European Central bank (ECB) can use the SMP profits, which are approximately EUR 2.0 billion to pay the IMF, which would give Greece some time to determine its future. Another scenario is where the IMF reverses its actions to revoke the 30-days grace period if it misses its payment, which will again provide Greece with some time to conjure a deal.

Tsipras Galore

While many criticise Alexis Tsipras the rabbit he pulled out the hat will buy Greece the required time to hold a referendum and avoid a default. Even if Greece votes NO to a deal with Europe on 5 July, 2015 (Sunday) this does not mean a deal cannot be made. The reason why the IMF is reluctant to compromise is simply because other countries such as Spain and Portugal could rebel and demand better terms.

This is a well-thought tactic used by Tsipras. If the Institutions will refuse to provide Greece with the credit for its debt payment as we wrote earlier they will be partially responsible for the aftermath. We doubt the Institutions wish to share such a responsibility. After clarifying what is happening with Greece and the upcoming referendum we can provide our trading strategy based on the latest events in Greece.

View our ‘Greece Referendum Newsroom’ for the latest news, polls, forecasts and possible impact on the Euro in a YES and a NO vote scenarios.

GREECE REFERENDUM NEWSROOM

EURUSD Trading Strategy

Euro Dollar trend is likely to be determined by the polls on the upcoming Greek referendum and whether Greece will receive an extension to pay its debt. We cannot see a scenario in which the IMF and the ECB wish to have a shared responsibility for forcing Greece to default. We therefore expect Greece will receive the required time, whether by using the ECB SMP profits or allowing Greece 30 days to pay its debt beyond 30 June. This alone is likely to lift the Euro against a basket of currencies.

The current polls suggest a majority for a YES vote to a deal with Europe although it is likely to change as we will reach the end of the week. So the polls are currently pointing to a deal while we believe Greece will enjoy an extension in order to hold the referendum. Under these circumstances we are therefore looking to long the Euro in the Forex market. We are focusing on EURUSD and EURJPY.

Predictions and EURUSD Technical Analysis

EURUSD Weekly Chart

Please click on the chart to enlarge:

EURUSD Weekly Chart, 29/06/15

EURUSD Weekly Chart, 29/06/15

We have discussed EURUSD reversed Head-And-Shoulders (H&S) multiple times in our trade alerts. The current weakness was triggered after the neckline of the reversed H&S was re-tested by the market. There is a firm support at EURUSD current price but it is difficult to determine whether it will contain the current weakness at the time of this writing. A deeper retracement may be seen towards 1.0805 before retracing higher. We are however anticipating the prior support level (in orange) to hold, which would lead to a moderate retracement in EURUSD.

The target for EURUSD is seen at 1.1440, which is the neckline of the reversed H&S. The protective stop loss order is layered beneath the support line.

EURUSD Trade Alert Details

EURJPY long at market price (1.0985)
Take profit: 1.1440
Protective stop: 1.0735
Risk Ratio (RR): 1 : 2 (approx.)
Estimated duration: 10 days

EURJPY Technical Analysis

EURJPY Weekly Chart

Please click on the chart to enlarge:

EURJPY Weekly Chart, 29/06/15

EURJPY Weekly Chart, 29/06/15

Similar to EURUSD, EURJPY reversed H&S is clearly noted on the weekly chart. Following a re-test of the reversed H&S neckline the price has retraced lower. We also note the 21-Weekly Moving Average (WMA) is concreting the lower support line (in orange) that may lead to moderate gains. The fact we are using a weekly chart could suggest that the Euro will in fact rise following the outcome of the Greek referendum that is scheduled to take place on 5 July, 2015.

The target for EURJPY is seen at the neckline (140.60). The protective stop is layered beneath the support line.

EURJPY Trade Alert Details

EURJPY long at market price (134.43)
Take profit: 140.60
Protective stop: 132.44
Risk Ratio (RR): 1 : 3 (approx.)
Estimated duration: 10 days

As our technical analysis is conducted on the weekly chart there is no escape from a tighter stop. The total exposure is approximately 500 pips on both trades.

29/06/15 UPDATE: EURJPY is trading at 135.63 at the time of this writing following a notable bullish correction in EUR pairs and crosses.

Please click on the chart to enlarge:

EURJPY Weekly Chart, 29/06/16

EURJPY Weekly Chart, 29/06/16

We are closing 10% of the trade at market price. EURUSD also enjoyed moderate gains but we are looking for a higher price in order to realize partials.

29/06/15 UPDATE II: EURUSD is trading at  1.1069 at the time of this writing.

Please click on the chart to enlarge:

EURUSD Weekly Chart, 29/06/15

EURUSD Weekly Chart, 29/06/15

We are aware Juncker is due to speak later at today’s session but we are closing 10% of the long trade at market price.

29/06/15 UPDATE III:  Moderate gains are noted across a basket of EUR pairs and crosses. EURUSD is trading at  1,1075 at the time of this writing. EURJPY is trading at 136.00. We are closing 10% of the trade in EURJPY.

29/06/15 UPDATE IV: As the gains in EURUSD continue, trading at 1.1115 at the time of this writing, we are closing 10% of the long trade at market price.

29/06/15 UPDATE V: EURUSD is trading at 1.1192 at the time of this writing. Only because the Non Farm Payrolls are due on Wednesday we are shifting the protective stop to the entry and close 20% of the long trade at market price.

EURJPY is trading at 137.09 at the time of this writing. We are closing 20% of the trade at market price and shift the protective stop to the entry.

29/06/15 UPDATE VI: Tsipras is due to give a TV interview at 19:00 GMT while the polls for the referendum will be released tonight.

EURJPY Weekly Chart

Please click on the chart to enlarge:

EURJPY Current Weekly Chart, 29/06/15

EURJPY Current Weekly Chart, 29/06/15

EURJPY is trading at 137.71, we are closing 20% of the trade at market price.

EURUSD Weekly Chart

Please click on the chart to enlarge:

EURUSD Current Weekly Chart, 29/06/15

EURUSD Current Weekly Chart, 29/06/15

EURUSD is trading at 1.1245, we are closing 20% of the trade at market price.

01/07/15 UPDATE: Fitch credit rating agency joined S&P and downgraded Greece credit rating. EURUSD and EURJPY corrected some of the gains were seen at the beginning of the week. Our stops are at the entry and we have liquidated most of the trade with a decent profit. We are continuing to monitor the markets. They key event is the Eurogroup  teleconference meeting that will take place on Wednesday morning (European time).

02/07/15 UPDATE: Following today’s session we have decided to close EURJPY long trade at market price, 136.39. Our EURUSD trade remains in the market with the protective stop loss order at the entry. We remind you that if Greece votes YES to a deal in Sunday’s referendum, the IMF demanded Tsipras will resign, which means new general elections in Greece.

03/07/15 UPDATE: We are closing 30% of the long trade in EURUSD at market price (1.1096) and leave 10% of the long trade in the market. The protective stop is irrelevant as a gap lower is likely to force slippage on the long trade. We should be able to withstand a bearish gap as we have liquidated most of the trade with a decent profit. This is a risk we are taking as we find no technical reason that suggests a bearish reversal in EURUSD.  We estimate a bearish gap is likely to be a-300 pips (approx.) while a bullish gap may be +200 pips (approx.)

The Greek Referendum Predictions and EURUSD 2015

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The Greek Referendum Predictions and EURUSD 2015

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The Greek Referendum Predictions and EURUSD 2015

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The Greek Referendum Predictions and EURUSD 2015