Third Bailout For Greece or Grexit? Dejavu?

Grexit or Greece Exit of the Euro Zone has once again managed its way to the top of headlines, as it was first announced by German Finance Minister Schauble on August 20 and then confirmed by PM Merkel.  This event obviously has the potential to develop into a full-on risk aversion event, especially considering economic recovery in the Euro Zone area was just getting started.  Let’s take a look at the timeline and the details of the third bailout announcement so that we can prepare for the future:

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  • On August 20, 2103 (DE) German Fin Min Schaeuble: “There will not be a new haircut for Greece but will be a new aid program” during CDU party rally.
  • On August 21, 2013 (DE) German Chancellor Merkel: We will not know how much additional aid Greece needs until mid-2014 – TV interview – Reiterates view of no more Greek debt haircuts
  • On August 22, 2013 (GR) Eurogroup head Dijsselbloem: Greece will need another aid package after the current one expires in 2014.
  • On August 26, 2013 (GR) Greece’s Fin Min Stournaras confirmed that Greece will have a financing gap of about €10B for 2014/15; will test the bond markets in H2 of 2014

So there you have it, Germany called for it, Eurogroup confirmed it, and Greece admitted to it.

But will this be enough to cause a “Grexit”?  Well, that is the question, isn’t it?

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Regardless of whether or not Greece exits Eurozone, I believe EURUSD will suffer another sell-off as we approach mid 2014.  Market is going to position ahead of this event, and with many politicians ready to do their posturing to take advantage of this event, I would not be surprised to see major sell-offs in EURUSD, although it is too early to say.

However, in the meantime, I would be focusing on Fed’s tapering as confirmation for taper would add more demand for the USD, and when you combine that with the uncertainty of Greece, you’ve got a good recipe for EURUSD sell in the short-term.  As long as the recovery in the Euro Zone remains painfully slow, I believe EURUSD still is a SELL on rally play.

Thanks,

henry-sig

 

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About Henry Liu

My name is Henry Liu and I am a Forex Trader and Mentor. I help traders achieve consistent income trading Forex while spending less time trading. My focus in trading is a combination of Fundamental Analysis, Technical Analysis, and Market Sentiment. Far too many retail Forex traders concentrate on just one aspect of trading, technical analysis, and ignore everything else; it is my goal (and vision) to educate every trader on how to take advantage of news trading and become more balanced traders.

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