MORE ON ACFXblog.comMARKET BRIEFING – LONDON OPEN 06.07.2015As I wrote this article last night, the first indications announced on Greek television would be that the “No” campaign would be victorious in this much anticipated referendum.
The early reports would soon prove to be a correct as the “No” campaign romped home to a resounding and famous victory. Greek Prime Minister Alexis Tsipras must right now be feeling vindicated in his decision to hold a hastily put together referendum.
Although this vote is a testament to the strength of Western democratic principles which were first established in Greece over 2000 years ago, this vote has also damaged the European project.
The ballot question was confusing and related to an austerity deal that was no longer on the table. The Greeks are the great romantics of the European continent. Never giving up hope and trusting their beliefs and reasoning would help them win the day.
This has been proven in history be it in battle against the Persian Empire where a small population endeavored to beat a superior foe. During the Second World War the Greeks where victorious in defeat against the superior numbers of German, Italian and Bulgarian armies. More recently the Greek Government proved the Western press, and in particular the BBC wrong by hosting a successful Olympic Games in 2004. In the same year the Greek national soccer team against the odds lifted the European Cup of Nations in Portugal.
So the Greeks are a gritty people who when agitated or when they have their backs against the wall can move mountains and achieve the impossible. Just look at what Alexander of Macedon achieved at such a tender age as he lived his father’s dream and established a Greek mega empire.
I may not agree with much of Alexis Tsipras believes in but he is charismatic and is ready for a fight. However Alexis is no Alexander and Varoufakis is no Hephaestion. The odds are just stack too high against this SYRIZA administration.
These leads us to Monday. The Euro project is now under serious threat. For the German Chancellor Angela Merkel the Greek vote will come as sickening news. Only last week the head of the Eurogroup Jeroen Dijsselbloem said that there was no other deal on the table.
Can Angela Merkel and the rest of the Eurozone now make an accommodation with this Greek Government? With so much bad blood between both sides and with all goodwill, credibility and trust for the Greek Government having evaporated it is hard to see how the talks can resume.
Furthermore, is it possible for the Europeans to now offer generous terms to the Greek government in full knowledge that a cave in to the demand of Tsipras will only store up further trouble down the road.
Across the Mediterranean Sea in Spain, the Podemos party is headed by the equally charismatic and radical leftist Pablo Iglesias Turrión. A victory for SYRIZA and a softening of the European position will act as a hammer blow to Spanish Prime Minister Mariano Rajoy Brey and a rallying call to Podemos. Ultimately this could lead to Podemos taking power at the Spanish general election that will take place this winter. A Podemos Government in Spain will make the Greek issue look like a nonevent.
Back to the referendum today’s vote has been framed by Tsipras as a victory for democracy. Furthermore with the power of the people backing his negotiating position the European partners can no longer defy the democratic choices of the people. The Greek Premier does have a point. The European Union should not just be an economic union but also a political and more importantly social union. There needs to be social justice and economic mobility for all of Europe’s citizens.
Unfortunately the construction of the Euro was to a German design. As such the single currency benefited German business which is heavily reliant on exports. With the Euro depreciating over the past five years the German Government was able to drag its economy out of recession through the sale of cheaper goods to the rest of Europe.
Back to the democratic process Alexis Tsipras has to recognize for all of the Euros shortcomings he cannot impose his will against the wishes of the citizens of the rest of Europe. The Governments of the other European countries have been elected under trust. Why should European the tax payers be made to fund a Greek economy that has been failing for decades.
This leads me back to Monday. The resounding “OXI” does not solve the immediate crisis which is a lack of banking liquidity. With as little as Euro 1 billion left in Greek banks there has been an announcement that banking clients cannot withdraw money from safe deposit boxes.
This is a major alarm bell for that reminds me of what happened in Cyprus back in 2013. There remains Euro 150 billion of client deposits in Greek Banks. However most of the larger account holders have already taken balances over the Euro 100,000 safety net out of the country. I would not surprise to see a bank bail in of accounts above EUR 10,000.
So where does this leave Greece and more importantly the Euro project. To let Greece fall out of the Euro would signal the beginning of the end of the single currency. There has to be a compromise between both sides. A failure to support Greece now will cause a humanitarian crisis within the Unions borders. A European project that was created to bring hope and peace to Europe will see one of its members unable to feed its people and acquire the medication that an ageing population desperately needs.
For all the efforts of the prior Greek Governments the debt was never viable. The IMF only last week stated that the Greek debt needed to be substantially restructured. From the very first day of this phase of the crisis some 5 months back, I put forward the idea of extending the terms of the Greek debt into perpetual bonds. There is an economic cost but no debt is actually written off.
There are claims that Ireland and Portugal have been success stories of the European austerity project. Have they really? These two countries together with Italy have massive debt to GDP levels. A new deal for Greece could become part of a new deal for Europe that once and for all puts Europe’s addiction to debt into rehab.
So who are the real winners and losers of Sundays vote. I can only think of one, my colleague Elena. We made a bet on the Greek referendum outcome. She bet that “No” vote would win. I hope she takes Drachmas?
EURUSD
The intraday technical outlookTrend 1 hour: Down
Target 1: 1.1111
Target 2: 1.0857
Projected range in ATR’s: 0.0127
Daily control level: 1.1150
GBPUSD
The intraday technical outlookTrend 1 hour: Down
Target 1: 1.5656
Target 2: 1.5440
Projected range in ATR’s: 0.0108
Daily control level: 1.5650
USDJPY
The intraday technical outlook
Trend 1 hour: Down
Target 1: 122.73
Target 2: 120.94
Projected range in ATR’s: 0.89
Daily control level: 123.25
USDCHF
The intraday technical outlookTrend 1 hour: Down
Target 1: 0.9532
Target 2: 0.9324
Projected range in ATR’s: 0.0104
Daily control level: 0.9500
USDCAD
The intraday technical outlookTrend 1 hour: Up
Target 1: 1.2694
Target 2: 1.2492
Projected range in ATR’s: 0.0101
Daily control level: 1.2530
AUDUSD
The intraday technical outlookTrend 1 hour: Down
Target 1: 0.7721
Target 2: 0.7543
Projected range in ATR’s: 0.0089
Daily control level: 0.7640
GOLD
The intraday technical outlookTrend 1 hour: Up
Target 1: 1186.19
Target 2: 1162.89
Projected range in ATR’s: 11.65
Daily control level: 1166.00
OIL
The intraday technical outlookTrend 1 hour: Down
Target 1: 56.50
Target 2: 53.28
Projected range in ATR’s: 1.61
Daily control level: 57.80
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