The key short-term support level in EURUSD was crushed earlier with prices breaking below the levels seen at the weekly reopening in another sign that Greece and creditors remain at odds over the best way forward for all parties. Europe remains stubborn in its position after taking off the table last week’s proposal and shelving it in a clear form of retribution against the Greeks for their “no” vote. The possibility of Greece defaulting and issuing a parallel currency in tandem with the Euro to begin recovering seems the most likely outcome at present. Comments from ECB Governing Council Member Ilmars Rimsevics echoed this point of view, stating quite succinctly that the “introduction of another currency in Greece is most realistic scenario.” The real kicker was his remarks on the future of Greece, maintaining unequivocally that “the Greek nation has been brave and has voted itself out of the euro zone.” These are the darkest comments yet as the idea of a member nation exiting could pave the way for other troubled nations to leave the Euro.
The political ramifications of letting Greece leave the monetary union are huge and should be the focus of the talks instead of the prospective default. Former Greek Finance Minister Varoufakis eloquently stated this point last week in an interview with Bloomberg Television, observing that the current crisis was political in nature. The upheaval of a member nation exiting might embolden other nations to examine the inherent lack of democracy in the currency union. It also begs the question of future viability as the ultimate goal of price stability has remained elusive since inception of the Euro. Traders are waking up to the new set of realities ahead for Europe as the window for striking a deal closes. Without a rapid cash infusion Greece has a high potential of defaulting in coming days, sending Europe into an unavoidable tailspin. The Euro continues to trend lower after yesterday’s gap lower, adding to losses versus the dollar. Gold has also sold off heavily, with prices falling over $12 points in the last three hours before a modest uptick. Investors are rapidly losing faith in the Euro’s ability to reinvent itself as the clock runs out.
The Floor Falls Out
Market Trends - 07/07/2015