Taking into account the ongoing negotiations between Greece and its creditors, then trading in the week that ended on last Friday was fairly difficult. The perfect example comes from the EURUSD currency pair as from the 23rd and 26th of June it moved in an almost straight horizontal line, making it very difficult to pick the right expiration date for an option.
Majority of expiration dates lingered the trading decisions
One other thing that came to make the trading decision even more difficult was the fact that the vast majority of expiration dates that were available were short term oriented as there are few brokers that are offering an expiration date bigger then end of month. This week being the last week of June as the month comes to an end of Tuesday, the maximum expiration date that could have been choose was seven days on an option taken last Monday.
Economic market is very unstable mostly because of Greek situation
That is too little time for my taste especially when the whole world is looking at how the Greek saga is developing. To make things even worse, there were no economic releases this week and therefore perfect conditions for algorithmic trading as this one is influencing the trading environment. If a couple of decades ago human trading was primordial and it was robots that followed humans, now it is really the other way around: human trading follows automatic trading. As a consequence, we must adapt in order to survive in this ever-changing environment.
Coming back to the trades this week, I am still sticking to my medium term view on both USDCAD and USDJPY pairs as I am as bearish as possible on both of them. While both pairs are really not moving, as USDJPY is only one hundred and fifty pips lower from more than twelve years highs. I traded mostly end of month expiration date for both pairs so the 30st of June is going to prove to be decisive. Judging by how price is moving, there are few chances to see a lot of action on the pairs but the Greek situation may bring something different.
Still last week I was trading the AUDUSD pair higher, meaning I bought call options and the arguments there were simply technical. I am looking for a so called double combination that is supposed to be completely retraced, or reversible, and this means the b wave in the last correction should be stronger. Until Friday, this was not the case. But all the above mean nothing in comparison with what happened Friday after markets closed.
Greece announced a referendum
In a stunning move, Greece Prime Minister Alexis Tsipras, on the way back from the EU summit, announced a referendum on whether the Greek people should accept the current proposal creditors (European Union, International Monetary Fund and European Central Bank) made to Greece. According to sources, this should be an “exceptionally generous” offer as Merkel of Germany said, but “humiliating” as Tsipras of Greece said. All in all, we should expect a bumpy opening on Monday and things are not looking really good for Euro fans. To be totally honest here, a common currency like Euro is would be better-off without Greece as the other remaining states that make the currency are in a way better situation, from an economic point of view. Plus, it is the very democratic principle, elections, that brought Syriza and a left-wing Government to decide Greece faith, so why not letting a referendum to do that as well? We don’t really know how market are going to open on Monday but one thing is for sure: expect a bumpy ride and a lot of volatility to influence trading as there are two other factors to be priced in.
One is the IMF (International Monetary Fund) payment that Greece is about to miss on the 30st of June, namely this coming Tuesday. Without a deal (and there will be no deal as the referendum will stretch over this date) there will be no payment and without a payment there is a default. It will be the first time when such an economy like the one Greece has will default on its debt. Second thing is related to month end flows in trading so look for the fix times, or the clearing times, to be decisive on Monday and especially on Tuesday.
As for the trading plan for next week, keep in mind that one of the most important economic releases out of the United States is going to be released on Thursday, the NFP (Non-Farm Payrolls) and this means volatility from the US will influence price action as well. I am still looking to use any possible bounce in the USDJPY and USDCAD pairs to establish new put options, while one the Euro pairs I am kind of bullish, despite all this mad price action. To wrap up all this, next week may be the decisive week when it comes to Europe to bring its things together. Make sure everyone has their trading pants on.