A Case For A EUR/USD Rebound & A Strategy To Sell It - NAB
Greece remains perilous, and the short-term stakes have ratcheted higher still after the ECB waded into the political debate by shutting off one path for Greece to access to cash, notes National Australia Bank (NAB).
"In preventing Greece from using its own debt as collateral, the ECB has pushed the new, inexperienced and potentially volatile Greek government into a tighter and more dangerous corner," NAB adds.
Crucially, NAB notes that the ECB has not shut off all funding avenues for Greece. As things stand the ECB is able to say Greece can tap Emergency Liquidity Assistance (ELA) as it did through much of 2012 (to the tune of EUR120bn) and for now T-bill access still seems possible.
"In the short-term we assume the ECB will keep open the ELA and T-bill funding channels and that being the case EUR/USD and the EUR crosses – while remaining volatile and prone to over-reaction on specific headlines – can drift up and probe the 1.1550-1.1650 key resistance areas from which the EUR broke down after the ECB revealed the extent of its QE program...Further out, we do expect some sort of deal," NAB projects.
"We continue to look to re-enter a short EUR/USD position, but are wary of a break up through the 1.1650 level (e.g. on any major reduction in ‘Grexit’ risk) and which potentially opens up a gap towards 1.20 that we’d feel more secure selling into. We may though lower our re-entry point, depending on incoming news flow and price action, and will advise accordingly," NAB advises.
