Trade Call: Short EUR/GBP

Crunch Time For Greece

This week, euro-area finance ministers prepare to reconvene in Brussels to try and break an impasse over financing Europe’s most indebted state, Greece. After committing 240 billion euros in aid and pursuing the largest debt writedown in history, creditors say Alex Tsipras’s government must abide by the agreements struck by previous Greek administrations.

Currently, Greece has more than 320 billion euros in debt outstanding, or about 175 percent of gross domestic product, mostly in the form of bailout loans from the euro area and the IMF. Its current bailout is due to run out at the end of this month.

Germany, the largest “country credit contributor”, insists that Tsipras’s government commit to an extension of its current rescue program and are more willing to discuss extending the maturity date of the debt. Tsipras wants a bridge program to be put in place for a few months while a new deal is agreed to replace the bailout, which has already forced drastic cutbacks onto ordinary Greeks.

Tsipras rode into power on a wave of anti-austerity and anti-bailout anger last month. Thousands of Greeks massed outside parliament in Athens on Sunday to back his strategy. Among those requiring a parliamentary vote on a new bailout are Germany, Slovakia, Estonia and Finland, all identified by one veteran of EU meetings as part of a hard core of opponents to Greece's plan.

The Eurogroup's main debate with Greece's "no austerity" stance will revolve around the funding of a bridge program, Greece's request to reduce the 'primary' budget surpluses, excluding interest payments, that it is required to reach, and privatisations and labour reform.

European Central Bank President Mario Draghi has so refused to discuss the possibility of Greece leaving the euro zone if an agreement with European Union and International Monetary Fund lenders fell apart as a result of Greece's demands to alleviate its debt burden. He simply reiterated the euro zone's founding position that membership is "irreversible".

With a deadlock looming and no quick solution in sight, Gold rose slightly, reversing a drop due to the stronger US dollar last week. The net-long position in Gold tumbled 17 percent to 133,964 contracts in the week ended 10th February, according to data from the U.S. Commodity Futures Trading Commission. Hitting a low of USD1,216 an ounce last week, Gold rose on Monday morning to USD1,232.

Top News This Week

USA: PPI m/m. Wednesday, 18th February, 9.30pm.
I expect figures to come in at -0.4% (previous figure was -0.3%).

Europe: German Flash Manufacturing PMI. Friday, 20th February, 4.30pm.
I expect figures to come in above 51.5 (previous figure was 50.9).

UK: Retail Sales m/m. Friday, 20th February, 5.30pm.
I expect figures to come in at -0.1% (previous figure was 0.4%).

Trade Call

Short EUR/GBP 0.7422

On the H1 chart, EUR/GBP is moving in an expanded range after a 220 pip drop from 4th February. Support is located at 0.7371 and Resistance is located at 0.7454. With Greece and the Troika at a deadlock and no clear plan in sight sight, I expect the euro to continue to drop. We will take an aggressive short entry on EUR/GBP when it edges up.

An entry is taken at 0.7422 with a stop loss of 35 pips placed a couple of pips above the Resistance level. We will have two targets on this trade, exiting the first position at 0.7387 and the second one at 0.7352.

Entry Price = 0.7422
Stop Loss = 0.7457
1st Profit = 0.7387
2nd Profit = 0.7352


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