EUR/USD – Euro Briefly Drops as Far Left Party Wins Greek Election

The euro briefly lost ground after Greece announced election results late on Sunday, as the far-left Syriza party won the election. In Monday’s European session, EUR/USD is trading in the mid-1.12 range. On the release front, German Ifo Business Climate improved to 106.7 points, matching the forecast. As well, the Eurogroup finance ministers meet in Brussels. There are no US releases on Monday.

Greeks went to the polls on Sunday, and the far-left Syriza party emerged victorious. Syriza ran on a platform of ending the crushing austerity scheme which Greeks have endured as part of the €240 billion bailout negotiated between and the EU, ECB and IMF. Predictably, the euro fell after the election results, slipping to 1.1099. However, the common currency has stabilized, gaining over 100 points on Monday. Syriza’s win certainly throws a monkey wrench into the Greek bailout program, but the new Greek government is likely to negotiate a deal with Greece’s creditors. A Greek exit from the Eurozone may make for interesting headlines, but such a scenario is extremely unlikely. Indeed, Greek Prime Minister-elect Alexis Tsipras has promised to keep Greece in the Eurozone. Still, there remains plenty of uncertainty as to what will happen with the bailout plan, so traders can expect events in Athens to have a strong impact on the movement of the euro.

There was good news out of Germany to start the week, as the German Ifo Business Climate continued to climb. The key indicator rose to 106.7 points, improving for a third straight month. This was the highest level we’ve seen since July, and points to continuing optimism from the business sector.

The markets had expected the ECB to pull the QE trigger on Thursday, but Mario Draghi has often underwhelmed in his monetary moves, so a QE package worth €1 trillion saw the euro plunge 250 points on Thursday. Under QE, the ECB purchase €60 billion each month, commencing in March and scheduled to last until late 2016. The ECB has been under increasing pressure to combat deflation in the Eurozone, as underscored by a December inflation reading of -0.2%. Thursday’s dramatic move demonstrates a strong determination by the ECB to “take the bull by its horns” in the battle to bolster inflation and kick-start the ailing Eurozone economy.

EUR/USD for Monday, January 26, 2015

EUR/USD January 26 at 12:15 GMT

EUR/USD 1.1227 H: 1.1260 L: 1.1138

EUR/USD Technical

• EUR/USD posted strong gains in the Asian session, breaking above resistance at 1.1231. The pair is steady in European trade.
• 1.1231 has reverted to a support role following strong gains by the euro. 1.1154 is stronger.
• 1.1340 is a strong resistance line.
• Current range: 1.1231 to 1.1340

Further levels in both directions:

• Below: 1.1231,  1.1154, 1.1066, 1.0906 and 1.0792
• Above: 1.1340, 1.1426, 1.1525 and 1.1634

OANDA’s Open Positions Ratio

EUR/USD ratio is pointing to gains in short positions on Monday. This is not consistent with the pair’s movement, as the euro has posted gains to start off the week. The ratio currently has a majority of short positions, indicative of trader bias towards the euro resuming its slide.

EUR/USD Fundamentals

• 9:00 German Ifo Business Climate. Estimate 106.7 points. Actual 106.7 points.
• All Day – Eurogroup Meetings.

*Key releases are highlighted in bold

*All release times are GMT

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