Refections on Greece

07 Jul 2015 01:05 BST · Time Estimate: 5 minutes ·

PROGRESS? - Striking similarities seen between this week's open and last week's. On both Monday's, the market gapped open and then recovered almost as quickly as it gapped. As far as the rest of the week is concerned however, I'm not so sure things will go the same way. I am concerned this Greek saga will linger on despite promises that a deal will be reached and the Greek banks will reopen. The trouble is, I'm not really sure what the referendum achieved as far as softening up the creditors and I suppose we will find out today. If we break things down logically, the creditors said 'here our the terms.' The Greek government, which is already representing the people, said we don't want austerity and don't like the deal. The creditors said it is what it is. The Greek government countered by calling a referendum on whether or not to accept a deal it was already assigned the responsibility to negotiate.

THINK ABOUT IT LIKE THIS - So now where are we? Well, I'm not so sure. The Greeks voted NO of course because they were convinced that all NO meant was that we don't like the current terms but definitely want to negotiate further. By most accounts, no one wants a Grexit. So we heard from the Greek people what we already knew after they had already assigned and empowered Tsipras to negotiate for them. What if I told you I was negotiating with someone to buy a car? The seller wants X price and I want Y. We aren't budging so I go to my friend and say what do you think. My friend says I think you should get your price and then I go back to the seller and say my friend agrees that my price is the one that we should transact on. Is the seller going to all of a sudden go 'Oh ya...you're right. If you're friend thinks so then I guess we have to do it on your terms.' Kind of ridiculous.

THE REAL DIFFERENCE MAKER - Now if I went to my friend and he advised me to walk from the deal (i.e. Grexit), this would be something that would change the dynamics of the deal and force some action. Either the seller would say 'don't leave and let's do a deal,' or both parties would part ways and move on. But this isn't the case here, both parties are still at the table and the leverage hasn't really shifted one way or the other to this point. I suppose the only tangible positive development for Greece over the past couple of days has been the IMF report urging more money to be thrown at Greece to help it out. This has legitimized Greece's plight somewhat and may be factoring into a deal more than the referendum.

THE GREEK BANKS - Another big variable that could force a deal is the Greek banks. Banks in Greece have been closed for over a week now and this is putting a lot of stress on Greek citizens. I don't think the situation will hold like this for much longer, especially with promises having been made that banks would already be open again. In the end, if at all possible, I think it's time we had a deal and the Eurozone saved face. This process has been embarrassing to say the least and it needs to be over with Grexit ruled out as an option. I am aware that giving in to Greece could open some floodgates as this relates to other debt ridden Eurozone economies. But for now, let's get a deal done! Enough is enough. At a certain point, politicians forget they are playing with peoples' lives. As a trader, I welcome the volatility. But I am happy to find a fresh round of volatility in something else.

CHINA MELTDOWN - One such alternative source of volatility that would otherwise be the big story right now is the collapse in China's financial markets. China has been doing whatever it can to try and prop up the ship, but the downside pressure has been intense as investors head for the exits in what had been a major bubble. Amazingly, I have written all of this and haven't once mentioned Fed monetary policy divergence as a driving theme. Right now, this theme is third on the list, though I believe it will come back to the forefront sooner than later. OK, I'll stop with this rant here. Here's a little on the trading side.

Never thought Fed policy divergence would be so low down on my list of market drivers. Via @joelkruger

THE TRADING - I bought EURCHF on the Monday open, expecting there to be a bounce and also knowing that even if there wasn't one, the SNB would be down there supporting. It seemed like a good way to play into an oversold gapping market, with the added protection of central bank support. I like the trade higher over the medium-term, but didn't get in for the medium-term and booked a quick profit on the Monday bounce. I entered at 1.0371 and exited at 1.0443. I am still watching GBPNZD, a short trade that worked out really nicely the other week that has now rallied up some more to fresh highs and looks even more extended than it had when I initially traded it. I really like the idea of selling again, but just don't have the green light yet. Stand by. Looking at the USD markets I have no feel. We just have to wait it out some more for additional clarity. The ECB has clamped down on Greece as we speak with respect to ELA, so hopefully this will be over soon. Hopefully.

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