Home EUR/USD Could Easily Catch Traders Wrong-Footed – Credit Agricole

EUR/USD Could Easily Catch Traders Wrong-Footed – Credit Agricole

The results of the Greferendum are awaited with high anticipation. But what does it mean for EUR/USD?

We have already seen some strange reactions in the world’s most popular pair.  Credit Agricole  explains:

Here is their view, courtesy of eFXnews:

As Greece prepares for its historic referendum markets are becoming even more nervous about Greek exit from the Eurozone. Grexit however may actually not be the greatest risk for EUR and FX markets more generally following the 7pm Sunday poll closing in Greece.

Indeed the greatest risk could lie in a ‘Yes’ and thus a back-firing of Tsipras and Varoufakis plan to gain greater leverage over its European creditors. Such an outcome could make for a highly volatile EUR/USD in thin trading Monday morning.

In particular, should initial exit polls signal a ‘no’ vote (ie. in public protest) only to then be followed by a slow drift towards a ‘yes’ throughout the evening as each constituency is counted, EUR/USD price could easily catch traders wrong-footed.

Beyond Greece, many investors are still trying to digest the impact of yesterday’s negative NFP revisions and associated drop in the participation rate on Fed policy. If labour market pressures are not intensifying at the speed indicated by unemployment claims, earnings are more likely to remain subdued and Fed policy cautious.

While such Fed caution need not rule out an initial hike from 0% in coming months, it will significantly lessen the quantity of anticipated FOMC tightening over the next 12 months undermining supportive USD-carry expectations.

One payrolls number in itself is no reason to shift our view, but clearly the body of evidence supporting a ‘v-shaped’ recovery during 2H 2015 in the US is looking less compelling following yesterday’s number.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.