All Trade Ideas and trading scenarios found on FX360.com are hypothetical. FX360.com has not placed these Ideas in a live trading environment. Forex Trading involves high risks, with the potential for substantial losses that exceed your initial deposit and is not suitable for all persons. Past performance is not necessarily indicative of futures results.

Euro, Aussie Fall Through Key Levels at Start of Week's Trade

Last updated 5/14/2012 3:23 AM ET (GMT -5) 0 Comments - Add your comment

• Share this:

Boris Schlossberg

Director of Currency Research, GFT

Risk currencies opened lower in Asian session trade as concerns over possible exit of Greece intensified over the weekend. Greek politicians were unable to reach a deal to form a workable coalition government with far left leader Alexis Tsiparas of the Syriza party pulling out of the talks over the critical issue of adherence to the bailout agreement. Mr. Tsiparas stated that  "As long as they insist on the bailout, to a policy that the people have rejected, they cannot ensure social stability."

Meanwhile in Germany, the  weekly Der Spiegel reported over the weekend that a task force in the German Finance Ministry has been assessing the consequences of a Greek euro exit for nearly a year. According to the magazine, the task force recommends that Greece should continue to receive money from the European rescue funds even after leaving the Eurozone but only in order to service the bonds held by the ECB rather than use for operational funds. The news will no doubt only inflame the debate allowing Mr. Tsiparas to argue that European rescue efforts are designed only to rescue investors rather than help Greek citizens to recover from teh country’s economic depression.

On the other hand German finance Minister Wolfgang Schaeuble said Germany would be willing to support further growth measures for Greece. Der Spiegel reported that German Chancellor Angela Merkel is now willing to give in to the demand of the newly elected French President Francois Hollande to add a growth component to the EU fiscal compact. Merkel and Hollande are scheduled to meet Tuesday in Berlin to discuss policy issues further.

With Greek political situation remaining unresolved two issues are becoming clearer. Greece will most likely have to have another set of elections and the anti-bailout forces of Mr.Tsiparas may gain more power. Secondly the EU fiscal authorities will have to abandon their demands for draconian austerity measures in Greece and will have to seriously consider the prospect of debt forgiveness if they want the country to remain in the monetary union.

The EUR/USD fell through the key 1.29000 support level and  Aussie broke parity for the first time this year time as risk aversion flows accelerated into the European open. Still the price action remained cautious rather than panicky as investors awaited to see how events develop in Greece. With no meaningful economic data on the calendar in both Europe and North America trading in FX is likely to take its cue from equities for the rest of the day.    

The information, including Commentary and Trade Ideas, provided on FX360.com should not be relied upon as a substitute for extensive independent research which should be performed before making your investment decisions. Global Futures & Forex, Ltd. (“GFT Markets”) and FX360.com is merely providing this information for your general information. The information and opinions presented do not take into account any particular individual’s investment objectives, financial situation, or needs. All investors should obtain advice based on their unique situation before making any investment decision and should tailor the trade size and leverage of their trading to their personal risk appetite. Any projections or views of the market provided by FX360.com may not prove to be accurate.

The views of the authors and analysts are not necessarily those of GFT Markets, its owners, officers, agents or other employees. FX360.com and the currency research team will not be responsible for any losses incurred on investments made by readers and clients as a result of any information contained on FX360.com. GFT Markets and the currency research team do not render investment, legal, accounting, tax, or other professional advice. If investment, legal, tax, or other expert assistance is required, the services of a competent professional should be sought.

Loading...

About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.