My medium-term to long term bias is bearish on the EUR for the following reasons -
Due to the uncertainty of the Greek exit investors perceptions are relatively negative albeit there have been recent positive developments as to an agreement. There are several possible scenarios thus I am both long in the short run and short in the medium term.
Near term is contingent on Monday's meeting and data. Thus far the Eurozone GDP has bounced back in specific countries - Germany (+0.7% q/q after +0.1% in Q3), France: +0.1%, Italy: 0% and Spain: +0.7%, Portugal: +0.5%.There has also been a positive shock in commodity prices and an accommodative stance from the ECB warrants growth to continue to proliferate.
Therefore while upside risk is limited medium term we are seeing near term bullish developments providing a buy opportunity as long as the EUR remains within the mean at 134.841.
Medium term -
There are several developments that can disrupt this trade.
Scenario 1:
Greece abruptly exits the EU
Result: Euro continues to descend due to domestic cashflows leaving and not being priced in
Scenario 2:
Greece comes to an agreement
Result: Euro depreciation but would require strategic positioning due to the possibility of a squeeze and investors can regain confidence in the Eurozone providing a squeeze higher.
Due to the uncertainty of the Greek exit investors perceptions are relatively negative albeit there have been recent positive developments as to an agreement. There are several possible scenarios thus I am both long in the short run and short in the medium term.
Near term is contingent on Monday's meeting and data. Thus far the Eurozone GDP has bounced back in specific countries - Germany (+0.7% q/q after +0.1% in Q3), France: +0.1%, Italy: 0% and Spain: +0.7%, Portugal: +0.5%.There has also been a positive shock in commodity prices and an accommodative stance from the ECB warrants growth to continue to proliferate.
Therefore while upside risk is limited medium term we are seeing near term bullish developments providing a buy opportunity as long as the EUR remains within the mean at 134.841.
Medium term -
There are several developments that can disrupt this trade.
Scenario 1:
Greece abruptly exits the EU
Result: Euro continues to descend due to domestic cashflows leaving and not being priced in
Scenario 2:
Greece comes to an agreement
Result: Euro depreciation but would require strategic positioning due to the possibility of a squeeze and investors can regain confidence in the Eurozone providing a squeeze higher.