How to Trade the Greek Elections with EUR/USD

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The elections in this small island nation are a big event that is highly anticipated by the markets, and the results will be felt for a very long time.

The reaction will likely be a roller coaster. The initial reaction in the markets may turn into a significant counter action. Here is the expected market reaction for EUR/USD. Note that while this article refers to the Euro/dollar currency pair, the same behavior will likely be copied in other “risk currencies”, in stock markets and in commodities, which are all correlated.

Timetable: The vote ends at 16:00 GMT in Greece and that’s when the exit polls are published. The first substantial official results will likely appear around 18:30. At 19:00, markets in Sydney open and that’s when the first reaction will be seen. At midnight, Tokyo joins in and this promises more action. The full action will be seen at the open of the London session at 7:00 GMT.

Scenarios: There are basically three scenarios: a victory of pro-bailout New Democracy, a victory of anti-bailout SYRIZA or yet another indecisive result. More background about the situation is available in the 3 scenarios for the Greek elections. Let’s discuss the impact:

  1. New Democracy wins – up and then down: This is the expected result according to rumors just before the elections. In this case, EUR/USD is expected to open much higher on this favorable results, with a big weekend gap. However, there is a good chance that the initial cheer will be quickly replaced with a downfall, as seen in the reaction to the Spanish bailout announcement. Why? Greece is in deep trouble, already missing the targets of the second bailout. It also suffers from significant withdrawals from banks, deferring of tax payments, an energy crisis and a shortage of medicine. And let’s not forget, Spain is in deep trouble, and it’s the euro-zone’s fourth largest economy.
  2. SYRIZA wins – down and perhaps up: This scenario has higher chances, given the momentum the party has in Greece. In this case, EUR/USD will likely open much lower. However, also this downfall will not necessarily last. G-20 leaders are meeting in Mexico from Monday and central bankers also hinted on willingness to act. Up to now, leaders have failed to stabilize markets, and the recent tension between France and Germany comes at a very bad timing. The world needs leadership now. Hopefully, the higher chances of the dreaded Grexit might push them to action. Rumors about coordinated action to flood the markets can stabilize the markets on their own, without real action.
  3. Hung parliament – steady grind down: This is what happened in the first round of elections. It will take time until all the votes are counted. Coalition talks will also take time. During this time, markets will likely be very worried and Greeks will continue withdrawing funds and avoiding tax payments. Also world leaders will await a Greek coalition before they action. EUR/USD is likely to open lower, and chop its way down as time passes by.

Are you planning to trade this big event? If so, what are you planning to do?

Further reading:

Get the 5 most predictable currency pairs

About Author

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.

25 Comments

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  3. You say Sydney markets open at 19.00GMT You surely mean the fish market because that would be 4 0clock in the morning Sydney time.

  4. I am going with option 2. wait for the down gap and buy from there. as per my technical chart, this seems to have a better possibility.

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  11. Pingback: Unofficial, Early Greek Exit Polls: New Democracy Leads with Narrow Margin – Guardian | Forex Crunch

  12. As I was caught with open trades that I could not close (caught in traffic), here’s hoping the EUR/USD will go long before my Stop losses come into effect. LOL

  13. Pingback: First Greek Exit Polls: Tied Race Could Lead to SYRIZA Victory | Forex Crunch

  14. john aldridge on

    my question today is the samaras is winning 29 percent to 27 percent so will they hold enough seats this time to form the much needed coalition or is this the exact same thing we had last time, and if so will the market open higher or lower ? i think asia opens at 6pm EST. so i was curious, i will be at my coin shop early if the price is dropping, well not to early i need it to drop, but if it drops what do you ppl think it will drop to ? myguess if there is a drop at leaast until the fed meeting, willbe around 1.25 in silver to maybe even 1.75, and after fed meeting, if they injsct stimulus of any kind, ( twist ) QE3, what ever i see prices jumping back to 31 in a wtwo to three day period and possibbly higher from there depending on the euro at that time and the stance of the agreement

  15. Pingback: Greek Elections: Final Exit Polls Point to Marginal Lead for New Democracy | Forex Crunch

  16. Pingback: Greek Elections: Pro-Bailout Coalition Not Guaranteed Even if ND Wins | Forex Crunch

  17. I’d guess that there won’t be much of a downturn in the $AUS during Australian trading time on Monday due to the expectation of a rise again upon open of the US markets, especially once US traders see the likely good performance of the Aust share market during Monday trading. Anything could happen, but I think people are expecting a 1c rise in the Australian $ during trading time in the US Monday night Aust time. Just my thoughts anyway.

  18. you guys r realy funy in my opinion the time of opening mkt of london is more important then any other market i already gets 100$ in my two trade in eur/usd and gbp/usd i hope now the upword section of these two peers are on and hope gbp go at 1.6400 and eur at 1.3500 if any bad news is come then they will fall more then before

  19. Pingback: Greek Elections: Decisive Victory for Pro-Bailout Parties Doesn’t Calm Markets | Forex Crunch