13 Jul 2015
EUR/JPY downside playing out on Greek uncertainty
FXStreet (Guatemala) - EUR/JPY, at time of writing, is trading at 136.03 with a high of 137.80 and a low of 135.56.
EUR/JPY price action has been volatile since the Asia open while markets were hanging on to each headline related to the Greek talks that went on though the early hours of the European morning on Monday. However, had markets jumped the gun as the downside resumes again?
EUR/JPY price action
EUR/JPY was initially offered in a bearish gap in Asia on the back of there being no deal struck over the weekend. 135.56 was the low of that gap from a US session 136.96 closing price. 137.79 was met after a bullish recovery drift from lows to 136.82 and form 136.71 bulls pilled in to rally a big figure on the news that a Greek deal was agreed. However, this was soon sold into and we are back down trading sub the 136 handle at time of writing. Technically, the cross has the 200 DMA at 137.15 to challenge to the upside if rallies persist. To the downside, 135.00 is key support ahead of and guarding 133.7/10, according to Karen Jones, chief analyst at Commerzbank.
EUR/JPY fundamentals
It may not all be what it seems. Markets may have jumped the gun on the announcements of a Greek deal being agreed. Basically, Greece has capitulated in return for the promises from the EU of a further bailout and to qualify for up to 86 billion euros of aid that Greece needs to stay in the euro. However, there are still tough reforms that the Greek parliament may not pass, especially given the referendum 'No' vote to many of what is being requested of Athens by its creditors.
Part of this involves Greece creating a €50bn asset fund through privatisation, half of which will be used to recapitalise the banking system. Alexis Tsipras, Greece's prime minister, has to pass six reforms through the Greek parliament by Wednesday which are said to include tax hikes, spending cuts, and pension reforms.
This could all lead to new elections later this year given that the people don't want this and the Greek parliament lefties, Syriza-led bloc, who rebelled this weekend when he sought their endorsement for such reforms, are highly unlikely to pass them - so, then what?
It appears essential that Greece show their commitments to these reforms in order for the deal to go ahead. Uncertainty doesn't favour EUR/JPY, while the euro acts as a funding currency and the Yen as a safe haven, so quite the opposite and this is looking like an uncertain outcome and hence a sell on rallies, and as we have seen, the euro dropped as the scale of Greece's challenges begin to alarm investors again while the European Central Bank held back from expanding its aid for Greek lenders, expressing their desire to wait for Greek lawmakers to approve reforms first.
EUR/JPY price action has been volatile since the Asia open while markets were hanging on to each headline related to the Greek talks that went on though the early hours of the European morning on Monday. However, had markets jumped the gun as the downside resumes again?
EUR/JPY price action
EUR/JPY was initially offered in a bearish gap in Asia on the back of there being no deal struck over the weekend. 135.56 was the low of that gap from a US session 136.96 closing price. 137.79 was met after a bullish recovery drift from lows to 136.82 and form 136.71 bulls pilled in to rally a big figure on the news that a Greek deal was agreed. However, this was soon sold into and we are back down trading sub the 136 handle at time of writing. Technically, the cross has the 200 DMA at 137.15 to challenge to the upside if rallies persist. To the downside, 135.00 is key support ahead of and guarding 133.7/10, according to Karen Jones, chief analyst at Commerzbank.
EUR/JPY fundamentals
It may not all be what it seems. Markets may have jumped the gun on the announcements of a Greek deal being agreed. Basically, Greece has capitulated in return for the promises from the EU of a further bailout and to qualify for up to 86 billion euros of aid that Greece needs to stay in the euro. However, there are still tough reforms that the Greek parliament may not pass, especially given the referendum 'No' vote to many of what is being requested of Athens by its creditors.
Part of this involves Greece creating a €50bn asset fund through privatisation, half of which will be used to recapitalise the banking system. Alexis Tsipras, Greece's prime minister, has to pass six reforms through the Greek parliament by Wednesday which are said to include tax hikes, spending cuts, and pension reforms.
This could all lead to new elections later this year given that the people don't want this and the Greek parliament lefties, Syriza-led bloc, who rebelled this weekend when he sought their endorsement for such reforms, are highly unlikely to pass them - so, then what?
It appears essential that Greece show their commitments to these reforms in order for the deal to go ahead. Uncertainty doesn't favour EUR/JPY, while the euro acts as a funding currency and the Yen as a safe haven, so quite the opposite and this is looking like an uncertain outcome and hence a sell on rallies, and as we have seen, the euro dropped as the scale of Greece's challenges begin to alarm investors again while the European Central Bank held back from expanding its aid for Greek lenders, expressing their desire to wait for Greek lawmakers to approve reforms first.