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EUR/USD: Buy rumors, sell facts!
The idea of saving Greece is taking more concrete forms for speculators on Forex. Already now, in our view, there is a group of market participants which is actively buying the EUR/USD pair in the hope that in June Greece will get its 50-60 billion euro bailout. Next week, EU and IMF representatives will present a report based on the audit of the situation in the Greek economy. We expect the report to have some positive notes in it (as was the case with stress-tests last year), which would calm investors down and spur closing of the EUR/USD shorts. The nearest resistance is eyed by the 1.43-1.45 level.
News background on Thursday clearly favored euro:
- German Finance Minister: Greek debt restructuring debt implies a significant risk; this has never happened before, so the consequences are not clear.
- Minister of Finance of the Netherlands: the Netherlands Government is prepared to take further steps to support Greece.
- Deauville (France) is hosting G8 Leaders Summit, the results of which may produce some hints of a speedy solution of at least some of the problems in Athens.
- China has expressed willingness to continue investing in distressed European bonds, whose auctions are to be held in June.
- The Government of Finland adopted a plan to help Portugal.
- Yield of Greek government bonds continued to decline on Thursday, in particular, the 10-year fell by 0.34% to 16.38% against a 17% high observed earlier this week.
It’s important to note that weak data released in the US during this week is providing support for the EUR/USD pair. Revised GDP and Jobless claims came out below expectations. Once the problems in Athens are resolved, speculators or the EUR/USD bulls will start betting on the interest rate differential between the US and Europe and favor the idea of a possible rate hike in Eurozone this summer. Such scenario may trigger an extended upside correction in EUR/USD.
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