Once more, we come to our trading stations at the start of the week to find that the EURUSD currency pair (and all other pairs involving the Single Currency) has gapped at the start of the Asian session as a result of news about Greece over the weekend.
This situation is normally not seen, and can be extremely dangerous for traders holding positions that might have attempted to anticipate a resolution to the crises, rather than a worsening in the situation. These gaps are often closed, but if they are not they have to potential to negate any stop loss orders that were in place. The exchange rate can simply jump over them while the trading server is not active over the weekend.
It is for this reason that most brokers reduce leverage availability over weekends, and why they are especially careful in this regard during a crisis like the one we are experiencing at present.
Greece is on the verge, but Varoufakis makes some sense
Yanis Varoufakis made an intervention at Saturday’s Eurogroup meeting that sought to justify the holding of the referendum in Greece on the latest proposals put forward by the creditors. The Guardian reported him as saying:
“Colleagues, the referendum solution is optimal for all, given the constraints we face.
If our government were to accept the institutions’ offer today, promising to push it through Parliament tomorrow, we would be defeated in Parliament with the result of a new election being called within a very long month – then, the delay, the uncertainty and the prospects of a successful resolution would be much, much diminished.
But even if we managed to pass the institutions’ proposal through Parliament, we would be facing a major problem of ownership and implementation. Put simply, just as in the past the governments that pushed through policies dictated by the institutions could not carry the people with them, we too would fail to do so”.
The reasoning here makes sense to us. The referendum in Greece is said to have “shocked” the other members of the Eurogroup. This must have its roots in the upcoming default on IMF repayment obligations, which is now a racing certainty. If it were not for the unprecedented nature of this, and the fact that there is nothing in the rules regarding membership of the Eurozone that can deal with it, one would be forgiven for thinking that another week on top of the inordinate amount of time that has already been expended on this issue, to allow the Greek people to give a mandate to their government, would not be such a big ask.
We live in extraordinary times.