The Weekly Update: Will Greece Prevail?

Hobson’s Choice

Tough negotiations between Greece and the Eurogroup  on Friday triggered a moderate rally in EURUSD as market speculations suggested an deal was conjured amongst the leaders. However, it appears to us the Eurogroup passed the ball to the Greeks to draft their own reforms to qualify for next tranche of the bailout, which will be closely reviewed on Monday by ‘the institutions.’  We wondered who these institutions are and discovered it is the new label for Troika.  Renaming Troika must been demanded by Greece, a smooth political gesture by the Eurogroup.

The potential for risk aversion mode in global markets may intensify should the proposed reforms will be declined by the EU. The reforms appear to focus on corruption and tax evasion without providing specific targets, which we fail to see how it will be accepted by the Troika. Greece is preparing for the possibility the presented reforms will be rejected and asked for a summit should that be the outcome on Tuesday. The political pressure on Alexis Tsipras, the Greek Prime Minister is mounting as he fails to cling to his campaign promises of relieving the Greek nation from the EU’s plans. The Eurogroup knows Greece will run of out of funds if it does not receive the next portion of the bailout , which will corner Tsipras should he fail to submit to their demands.

The Greek Reforms

If the reforms are rejected on Tuesday, the odds of Alexis Tsipras resignation substantially increase.  Driving Greece into a brick wall into the form of bankruptcy is undesired. Instead of being written in the history books as a ‘Hero’ he may be remembered as the man that choked Greece out of liquidity, which unleashed an unnecessary crisis to global markets. Verbal threats of exiting the EU or offering his resignation is sufficient to trigger a significant risk aversion mode that will spill through the European banking sector, especially UK banks that we suspect are highly exposed to Greece. Monday may be the pricing-in of such probability and Tuesday will be the key day for global traders.

Technical Strategies

The charts at first glance appear to signal no evidence of an emerging crises from Greece. We believe many traders may be caught off guard if risk aversion will indeed dominate the markets. We will begin by focusing on indices, starting with the Dow Jones 30 (DJ30).

DJ30 Technical Analysis

The DJ30 painted multiple false reversal patterns, which we have ignored thanks to our trading strategy. We have been made aware of the current reversal pattern at the beginning of February, 2015 and simply waited for a clean entry to short the index.

DJ30 Monthly Chart

Please click on the chart to enlarge:

DJ30 Technical Strategy, 22 February, 2015

DJ30 Monthly Chart, 22/02/15

The last time such a reversal pattern occurred on the monthly chart was in November, 2007 (highlighted on the chart), in which the Dj30 shed over +1,000 points. On our previous trade in the DJ30 we broke the trade into 2 parts, which was a wide decision as a decent profit was earned. We are truly debating whether to break the short trade into multiple parts at the time of this writing. We are aware what could be the fundamental trigger to instigate the risk aversion mode in the market and a very tight window to capitalize over such a scenario.

Our bearish target for the short trade in the Dow Jones 30 is 16,760. The entry and the protective stop loss order will be updated at the opening of the market. A substantial bearish gap may prevent us from executing the short trade. Please note we are also monitoring the FTSE100 4hr chart but choose to wait for London open to consider increasing our exposure to the indices.

EURUSD Technical Analysis

After studying EURUSD charts we are unable to establish a technical entry for a short trade in the market. The pair is held in a tight range in what may resemble a mutation of a bearish of bearish flag on the daily chart.

EURUSD Daily Chart

Please click on the chart to enlarge:

EURUSD Technical Strategy, 22 February, 2015

EURUSD 4hr Chart, 22/02/15

We cannot establish a short trade without a valid technical entry. We do however suspect many traders will be taken by a bearish surprise as we clarified earlier. The mutated bearish flag is insufficient to execute a short trade in the pair.  As we stated earlier, we fear many technical traders will be taken off guard in light of recent fundamental developments.

However, the Japanese yen (JPY) tends to benefit from safe-haven flows under geopolitical uncertainties.

We have examined multiple JPY pairs and crosses in the Forex market and despite the fact we found technical entries the required stop loss order is exceeding our risk management techniques. Placing over +800 pips stop loss order in GBPJPY for example is something we do not tolerate. We are already holding a short trade in USDJPY and will only increase our JPY exposure should the trade meet our risk management criteria, possibly through intraday entries on Monday. We are also examining EURCHF but further details will be updated to this weekly review when we find relevant. Please note you will be instantly updated by us via an email when an update issued.

Technical Levels For the Week

In an effort to enhance the weekly update we provide you with the key technical levels for a basket of currencies in the Forex market. The price levels are derived from the 4hr chart, which may assist you in settings targets, stop loss orders and entries. All technical levels are manually researched.

 USDCHF 0.9338 0.9419
 GBPUSD 1.5338 1.5434
 AUDUSD .0.7791 0.7868
 GBPJPY 161.60 184.03
 USDCAD 1.2478 1.2553

If you would like to see more instruments added to the technical levels such as commodities, indices, stocks or even more FX pairs and crosses please notify us. Updates will be posted at the bottom of this page.

23/02/15 UPDATE: DJ30 is trading at 18,125 at the time of this writing. We are executing a short trade (single) at market price, protective stop loss order layered at 18,411, targeting 16,760.

23/02/15 UPDATE II: DJ30 is trading at 18,084 at the time of this writing, early profit for the short trade. We are closing 5% of the short trade at market price. We decided not to increase our exposure to other indices at the time of this writing.  EURUSD is trading at 1.1302 at the time of this writing, down -80 pips from the opening of the markets as we have anticipated.

04/03/15: It took a while but our short trade in DJ30 is in a fair profit as the index trades at 18,060 at the time of this writing.

DJ30 60min Chart

Please click on the chart to enlarge:

DJ30 60MIN Chart, 04/03/15

DJ30 60MIN Chart, 04/03/15

As this is a month entry we have yet to gain a sufficient distance from the entry in order to shift the protective stop loss. We are aware the Non-Farm Payrolls (NFP) is due on Friday. We are closing 10% of the short trade at market price.

06/03/15 UPDATE: As we near the NFP, the DJ30 is trading at 18,120 at the time of this writing. We are reducing out exposure to the index and close 10% of the short trade at market price.

06/03/15 UPDATE II: Monthly entry always takes time. DJ30 weakness has began in today’s session, trading at 17,856 at the time of this writing:

DJ30 4hr chart

Please click on the chart to enlarge:

DJ30 4hr chart, 06/03/15

DJ30 4hr chart, 06/03/15

We are closing 30% of the short trade at market price and take a moderate risk by shifting the stop loss order to 18,159. The stop should be shifted at the monthly close but we believe we have gained a sufficient distance from the market. This research will now be available to all traders. If you wish to have access to our trade alerts in real time please apply for the global trade alerts package.

All traders that are currently on the package will be notified via an email when an update is made to DJ30 short trade.

10/03/15 UPDATE: DJ30 losses continue in today’s session, inline with our technical projection for the index.

DJ30 4hr Chart 10/03/15

Please click on the chart to enlarge:

DJ30 4hr chart, 10/03/15

DJ30 4hr chart, 10/03/15

We are closing 10% of the short trade at market price. Stop remains at the entry.

10/03/15 UPDATE II: As the selling continues DJ30 is trading at 17,720 at the time of this writing. We are closing another 10% of the short trade at market price.

20/03/15 UPDATE: In light of the FOMC statement DJ30 triggered the protective stop loss order at the entry. We have ended the trade with a decent profit.

As all trades are closed this page can  now be accessed by all traders. Open trades are restricted to members only. We have been proving trade alerts in the spot Forex market since May 2014. Sign up for one of our plans and review our documented trades performance.
The Weekly Update: Will Greece Prevail?

The Weekly Update: Will Greece Prevail?
                                             The Weekly Update: Will Greece Prevail?
The Weekly Update: Will Greece Prevail?
                                         The Weekly Update: Will Greece Prevail?
The Weekly Update: Will Greece Prevail?

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Last Updated on May 30, 2015