Binary Options Trading Briefing 18-22.6 – Greek Elections to be Main Driver of Risk Sentiment

Binary Options Trading Recommendation for this week – Trading Tips and Market Info

By Richard Cox

 

We are shaping up for what could be a very exciting and very volatile trading week with the main event coming before the week itself even begins.  To be specific, we are talking about the Greek elections that are scheduled to take place on June 17th, and these will help to determine whether or not the country will be able to elect a majority government that is committed to austerity measures that have been structured by the larger bodies in the European Finance Ministry. 

 

          Essentially, the issue here is that in order for Greece to continue to receive economic aid from the EU, Greece must be willing to implement certain austerity requirements so that the other European economies can be convinced that Greece is getting a handle on its ever-increasing debt problems.  Without this, some of the larger economies (such as Germany and France) are likely to be unwilling to vote o distributing more economic aid funding to Greece, and the likely result of this would be wide-scale defaults in the country’s treasury obligations.  In the most extreme scenario, what could happen is that Greece is unable to remain part of the European Monetary Union (and, in effect, abandon the use of the Euro as its recognized currency). 

 

 

Implications of a Greek Exit from the EMU

 

          If Greece fails to elect a majority government committed to austerity, understanding the effects on the Euro can be complicated.  Since the Euro falls into the category of “high yielding” currencies (even though the country’s interest rates remain at historically low levels for the moment), the initial reaction is likely to be a sharp sell-off in the EUR/USD, as investors begin to flock to safe haven assets.  In this case, the US Dollar, and assets like Gold are likely to be the main beneficiaries.  Risk sentiment on the whole will also be a main casualty, as the uncertainty created by a Greek Exit will not make investors overly willing to engage in risky trading scenarios. 

 

          Longer term, however, there is scope that the impact of a Greek Exit would not be entirely negative for the currency.  This argument stems mostly from the fact that some of the “dead weight” will be removed from the Eurozone and what will be left of the region will be stronger in terms of debt levels and overall productivity.  This would be a long term view, however, so investors should wait for the storm volatility to pass before buying the currency once again. 

 

 

My Trading Recommendation in 50 Words: 

With markets likely to encounter a bout of risk aversion this week, I will be looking to enter into one week CALL options in the US Dollar.  With the USD/CAD trading at critical support levels, I will enter at 1.0210 looking for a rise back to the monthly highs.

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