EUR USD (1.2965) Snippets of information trickling from meetings gave an impression on Friday that Greece and the IIF were converging towards a deal. As a result the euro gained a little momentum. Later however, reports indicated that for the IMF and the European Commission had not approved the deal; the minimum haircut and the coupon on the new Greek bonds needed to offset the incremental costs of Greek debt would have to be keener than that agreed in the negotiations. For the banks and hedge funds on the other side of the table, the terms might prove unacceptable; already at the weekend, it was reported that the private sector had already made its best offer. As today’s eurozone Finance Minister’s meeting starts without a clear cut deal on Greece, the sentiment for the euro looks more subdued. The issue of Greece has turned the cautious optimism of last week into renewed worry.
Although the news environment for the euro has turned relatively sombre, we reckon that recent stabilisation has given the euro the opportunity to climb further to 1.3085 and then to 1.3285. The Market Bias, which reached neutrality on Friday, also suggests that leftover longs have also had the opportunity to exit and so should no longer be burdensome for the single-currency. Hence we embark on an immediate bullish strategy, whose objective will be the higher of those two upside points. The risk-limit is set at 1.2840.
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Deutsche Bank