The Greek crisis has deteriorated rapidly and has already sent EUR/USD down in an impressive Sunday gap.
But the euro is not the only currency at play. There are other impacts, and Citi advises:
Here is their view, courtesy of eFXnews:
Citi’s take on the initial moves outside of EUR is that they have been a bit modest so far.
“The commodity currencies in particular are showing more resilience than might be anticipated in the face of the Greek developments. This makes selling cross-JPY one of the more attractive ways of positioning post open, with expectation for more downside in CADJPY and AUDJPY in particular,” Citi advises.
“The issue for commodity currencies is that uncertainty on EUR is likely to persist for some time to come and volatility stands to rise in the days ahead. Directionally, it is our expectation that EUR itself is unlikely to see a sustained rebound and should, in fact, see additional pressure over time partly as a function of potentially accelerated ECB asset purchases,” Citi argues.
“However, rising volatility is a more unambiguous negative for AUD and CAD given that investors, who are already ‘gun-shy’ following recent poor returns, may be forced to further cut exposure. The degree to which volatility picks up across asset classes may set the tone for the degree to which investors reduce risk in FX space, so bigger moves could be in store as more asset markets open,” Citi adds.
All in all, Citi advises clients to long GBP and JPY aginst AUD and CAD.
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