Pros and Cons of Brexit

On June 23rd, Britain people will vote to stay in or leave (Brexit) the European Union. The verdict matters a lot since it is a life-changing decision. I will briefly address some of the pros and cons of Brexit, but will further address it after the vote, especially if UK leaves EU.

Brexit Pros:

  • The European Union costs United Kingdom 350 million pounds ($503 million) a week. That’s $26.2 billion a year, 4.6 times less the UK education budget of $121.1 billion in 2015. That $26.2 billion is 1% of 2015 GDP of $2.63 trillion. That $26.2 billion is 2.45% of 2015 total spending of $1.07 trillion.

Note: That 350 million pounds a week cost is before “the rebate.” In 2015, Britain actually paid under 250 million ($359 million) pounds a week. But hey, UK does not control the rebates. The cost of membership has been increasing over the years, especially after the financial crisis.

UK Payments To EU Budget Since 1973
UK Payments To EU Budget Since 1973

What happened with Greece and is still happening, is a warning sign of more economic troubles to come in Europe. That possibly will continue to increase the cost of EU membership.

  • Under EU fundamental right of free movement, Britain cannot prevent anyone from another member state coming in to the country. This has resulted in a huge increase in immigration into Britain from Europe.

In 2015, 270,000 EU citizens immigrated to the UK and 85,000 EU citizens emigrated aboard. Net-migration was 185,000.

Migration By Nationality
Migration By Nationality

2.94 million people living in the UK in 2014 were citizens of another EU member country. Those people account for 4.7% of the UK population.

2.2 million citizens of another EU member country are in work, 7.02% of working population. Majority of EU member citizens are coming to the UK for work reasons. 61% of the migration who came for work reasons were EU citizens.

Immigration To The UK By Main Reason
Immigration To The UK By Main Reason

See how EU citizens coming to the UK for work reason started to accelerate in 2013. This can be related to economic difficulties such as Greece, Spain, Portugal and Italy. As I mentioned above, “What happened with Greece and is still happening, is a warning sign of more economic troubles to come in Europe.” That should lead to even more upsurge in migration for work reason, making it more competitive for UK citizens to find jobs and possibly lowering wages.

If UK decides to leave EU, the country would be able to reform immigration laws without input from the EU and increase jobs and wages for UK citizens (hopefully they have the skills).

Brexit Cons:

  • EU membership makes UK attractive for international investment and provides access to trade deals with more than 50 countries around the world (expensive makeup, isn’t it?). Because EU institutions have the ability to prevent the UK from negotiating its own trade deals outside Europe, it would have to re-negotiate some trade deals, with EU and non-EU countries including the US, China, Japan and India. It is extremely possible the Brexit will impair confidence and investment for few years.

In 2015, the EU accounted for (pdf download) 43.7% of exports and 53.1% of imports

In 2014, the EU accounted for 496 billion pounds ($712 billion) of the stock of inward Foreign Direct Investment (FDI), 48% of the total. Globally, the UK is the third largest country in terms of its absolute value of inward FDI stock ($1.7 trillion), followed by China ($2.7 trillion) and U.S. ($5.4 trillion).

Why is FDI so important? It has the potential for job creation and productivity, increasing both output and wages.

If UK were to leave EU, it would dampen FDI due to uncertainty of the future. Firms would reduce investment in UK, leading to lay offs and so on (domino effect).

3.3 million UK jobs are linked to UK exports to other EU countries. Auto industry would be particularly at risk. In 2015, 77.3% of cars built in the UK were exported, a record high. EU demand grew 11.3%, with 57.5% of exports destined for the continent. In 2014, the motor vehicle manufacturing accounted for 7.9% (pdf download) of total manufacturing, up from 5.4% in 2007. The end of free trade agreements would definitely hurt UK automotive industry.

If UK were to leave the Single Market (EU), locating production in the UK would be less attractive because it would become more costly to ship to EU members. 77% of members of SMMT (Society of Motor Manufacturers and Traders) – the voice of the UK motor industry – believes remaining in EU would be the best for their business. 9% believes Brexit is the best path. 14% doesn’t know, like economists don’t know the real impact of Brexit due to a large base of issues and views.

66% believes EU important to them because of its access to EU automotive markets.

Why The EU Is Important To SMMT Members
Why The EU Is Important To SMMT Members

Brexit would send a ripple effect. For the government (less tax revenue), for businesses (rising costs) and for consumers (lower income).

There’s also the issue of UK citizens in the other EU member countries. They have the right to live, work, vote, run a business, buy a property, and use public services such as health. Some, if not all, of these rights could vanish if UK leaves the EU.

Sure, UK will try to protect them. Since one of the main goals of Brexit is stop the inflows of immigrants into UK from EU, EU might retaliate against it.

UK (the wife) has been married to EU (the husband) for 43 years (UK joined EU in 1973). Part of her wants to get out of the cage. Other part of her wants to keep some of the benefits. If Brexit, it will be very expensive and messy divorce, but may be for the good.

 

There are so many views on this “monumental” and “out-of-focus” complicated issue. Not every issue is covered in this article. If UK is the first country to leave EU, I will do much more research and analyze it.

If you have any views, I would love to know in the comments below. If you have any questions about any issues related to Brexit, I would be happy to answer them ASAP. Don’t be surprised if the answer is 5 paragraphs long. Thank you.

Liar’s Poker Player, Greece, Loses: Falling Further Through The Wreckage In Greece

Greece had a close call to exit from the 19-member euro-zone (Grexit) following months of uncertainty. Alex Tsipras and Yanis Varoufakis were playing creditors for fools and bluffed too much. Now, they have lost “Liar’s Poker”.

Two weeks ago, more than 61% of Greeks rejected a deal in a referendum that included pensions overhauls and sales taxes. Then on Monday morning, Greece finance minister, Yanis Varoufakis, resigned after Eurogroup participants called for his resign because his absence from its meetings. Before the vote, he said he would resign if Greeks voted “Yes”. He is replaced by Euclid Tsakalotos, who has been involved in talks with European and International Monetary Fund (IMF) creditors.

Then, Euro leaders said that July 12 (Sunday) would be “deal or no deal”.  Several days before July 12, Greece Prime Minister Alex Tsipras provided the same type of deal that Greek people voted “No” for, but with little bit tougher austerity. He broke his promise to Greek people.

Over the weekend (July 11-July 12), Euro leaders clashed over the deal. On July 13 morning (Monday), deal was reached. Euro-zone leaders agreed to give Greece three-year bailout up to EUR 86 billion ($93 billion) of aid which Tsipras accepted. This time, he absolutely broke his promise to Greek people.

The deal is much tougher and harsh, for Greece and its people, than the deals in the past few weeks. The deal also includes 30-year, euro-50-billion state privatisation programme. Half of the fund will be used to recapitalise Greek banks, while the remainder will used for debt servicing and other economic needs.

On late July 15 (Wednesday), the Greek parliament approved the deal. In 300-seat chamber, 229 voted to approve the deal and 64 were against it. There was 6 abstentions and 1 absent.

On the morning of July 16 (Thursday), after leaving rates unchanged, European Central Bank (ECB) President, Mario Draghi stated in the press conference that Emergency Liquidity Assistance (ELA) would be increased by 900 million euros ($979 million) over a week. There were reports that Greece asked for $1.5 billion ELA assistance.

On the same day, the Eurogroup finance ministers agreed to the launch of bailout talks and approved 7.2 billion euros ($7.6 billion) in bridge loans for three months. It will allow the Greek government to pay off upcoming payments. On July 20 (Monday), Greece is due to pay 3.5 billion euros ($3.8 billion) to ECB. Greece also has to pay about 2 billion euros ($2.2 billion) of arrears to the IMF. This bridge loan will “buy” time until the bailout is finalized.

Greek banks are scheduled to open on July 20 (Monday) after a 3-week closure. However, capital controls, or restrictions on cash withdrawals will remain in place.  Daily cash withdrawal is limited at 60 euros.

Despite more aid being given to Greece, the country’s debt level is still a major problem. The country has about EUR 320 billion debt ($345 billion), close to 200% of Gross Domestic Product (GDP).

Source can be found here 

There are many calls for a debt haircut (not what you’re thinking). Debt haircut is reducing the amount of money owned. For example, if  someone owns about $10,000, but cannot pay it all. Creditor can try to accept to get paid a fraction of $10,000, say $4,000. After all something is better than nothing.

Some people including Christine Lagarde, managing director of IMF, disagreed on debt haircut. She said debt relief was needed. Extension of Greek debt maturities, extension of grade periods, and reduction of interest rates would be enough, she said.

Even though the deal gets finalized or not, Greece loses. With the deal, life gets harder. Without the deal and exit from euro-zone, life gets much harder.

I learned one important lesson over the past few months. Anything can change anytime. Greece’s current deal might fall through any moment. So much uncertainty has caused EUR (Euro) currency to move around in different directions.

Ever since the deal was announced, EUR/USD has been falling.

EUR/USD - Hourly
EUR/USD – Hourly

I have been short on Euro for some time now and I will continue to be short. Even with deal close, tough challenges remain ahead. ECB might increase or even extend its Quantitative Easing (QE) program, giving support to the European stocks and causing Euro to weaken further. I believe EUR/USD will reach parity level in the next 6 months.

Once the Greece drama settles, more focus will be on the fundamentals in the euro-zone outside of Greece, which accounts for more than 98% of the region’s GDP.

No clear road ahead, still. What’s next?

Expectations for the Fed to raise rates ticked higher

Last Friday (May 22, 2015), U.S Consumer Price Index (CPI) report for April was released and it was in line with expectations. CPI increased a seasonally adjusted 0.1% in April and core-CPI (excludes food and energy) increased 0.3%, largest since January 2013. CPI reflects what people pay for goods and services. It’s an important indicator for inflation. The Federal Reserve watches inflation numbers closely, to determine the health of the US economy and whenever to raise interest rates.

CPI and Core-CPI (Jan 2014 - April 2015)
CPI and Core-CPI (Jan 2014 – April 2015)

Over the past 12-months, CPI declined 0.2% (biggest year-to-year drop since October 2009), largely due to the plunge in energy prices (energy index), which fell 19.4% over the last 12-months. However, core-CPI (which excludes food and energy, the violent categories) increased 1.8% over the last 12-months.

The positive inflation report may suggest that the Fed may not be that far away from raising interest rates. Stronger numbers gives a sense of relief that the US economy is pulling itself out of a slump that dragged growth down to 0.2% (GDP report previous post) in the first quarter of 2015. However, the inflation is far below the Fed’s 2% target.

The positive change in core prices was driven by rising costs for housing, medical care, furniture, and vehicles, while clothing and airfare prices declined. Fall in the oil prices led airplane companies to lower their airfares, to complete with competitors. I believe clothing and airfare prices will start to rise soon because summer is here. In the summer, people tend to travel more often (demand increases), pushing prices up. Oil has rebounded to the range of $60, as oil inventory decreases.

The dollar rose after the CPI report. The greenback (the dollar) gained almost 1%, rising to a highest price level since late-April. US markets were flat on Friday after both the Dow and the S&P 500 hit new records this week.

Dollar Index (/DX) - Hourly
Dollar Index (/DX) – Hourly

According to Federal Open Market Committee (FOMC) meeting minutes released last Wednesday (May 20, 2015), FOMC expects inflation to gradually rise as the labor market improves and transitory effects such as low oil prices fade away. They believed that there would not be enough information of overall health of US economy to start raising rates at their next meeting in June. The next policy meeting takes place on June 16 and June 17.

Chances of rate hike in June are very low, but the door is not closed. If the next non-farm payroll and Prelim GDP (Gross Domestic Product) (Friday, May 29, 2015) comes out very positive, the Fed will likely raise the rates. Prelim GDP is the second estimate of the last quarter. If you want to know more about the first GDP estimate of the last quarter, click here.

Last Friday (May 22, 2015), Federal Reserve Chairwoman Janet Yellen spoke about the US economic outlook at the Greater Providence Chamber of Commerce Economic Outlook in Rhode Island. She said that the Federal Reserve is on track to raise short-term interest rates this year, but will likely proceed slowly and cautiously.

As to trading, I would go long on the dollar and short EUR/USD. Why would I short EUR/USD? Recently, EUR/USD rebounded all the way to above 1.1450. As of right now, it’s around 1.1000. The recent rise in EUR/USD is an opportunity to go short.

News: First, I believe the U.S economy will rebound and future US economic reports will be positive, sending USD higher. Second, I believe Greece will default and eventually leave euro-zone (Greece exiting euro-zone is also known as “Grexit”), which will plunge Euro. Current Greece headlines are just background noises, until we know for sure that Greece will be staying or not.

Technical: If you look at 1-HOUR chart of EUR/USD, you can see that EUR/USD broke a strong support level that used to be resistance. If you look at WEEKLY chart of EUR/USD, you can see that there is a Bearish Engulfing Pattern. Technical seems to be bearish.

EUR/USD - Hourly
EUR/USD – Hourly
EUR/USD - Weekly
EUR/USD – Weekly

 

If you have any questions/comments, feel free to leave comments below and/or contact me by going to “Contact Me” box above. I can also be reached on twitter (@Khojinur30). Thank you.

Recap: Europe, Australia, United Kingdom, Canada, and The United States.

This week was full of financial news. I will be talking about some of them, which I consider too important to pass up. I will also give my views on them.

Europe:

Last Monday (March 2, 2015), a report showed that Consumer Price Index (CPI) Flash Estimate ticked up to -0.3% year-over-year from previous -0.6%. Markets were expecting -0.4. The data was little positive. However, It remained in negative territory for the third consecutive month. There are deflation in euro zone. The deflation might soon end later in the mid-year, as Quantitative Easing (QE) program starts this Monday (March 9, 2015).

Last Thursday (March 5, 2015), European Central Bank (ECB) kept the interest rates unchanged. During the press conference, the President of ECB, Draghi stated that the QE would start on March 9. ECB raised its projections for the euro area, “which foresee annual real GDP increasing by 1.5% in 2015, 1.9% in 2016 and 2.1% in 2017.” Remember that these are just projections and can change anytime. Plus, central banks are not right all the time. Mr. Draghi felt confident as he talked about the future of Euro zone. He believes Euro zone will greatly benefit from QE program and some areas already have since the announcement of QE last January.

This week, EUR/USD fell all the way to 1.0838, lowest level since September 2003, due to positive U.S jobs reports, Greece worries and QE program starting next week. I was already short on EUR/USD and I still believe it has a room to go further down.

EUR/USD Hourly
EUR/USD – Hourly

Australia: 

Last Monday (March 2, 2015), Reserve Bank of Australia (RBA) announced that they will leave the interest rate unchanged at 2.25%. In February meeting, RBA cut by 0.25%. This time, they did not. RBA is in “wait and see” mode, for now. I believe another rate cut is coming in the two meetings, depending on future economic reports. In the Monetary Policy Decision statement by RBA Governor, Glenn Stevens stated that the Australian dollar “remains above most estimates of its fundamental value…A lower exchange rate is likely to be needed to achieve balanced growth in the economy…Further easing of policy may be appropriate…”.  I believe RBA is open to further cuts and it will come in the next two meetings. However, positive economic reports might change that direction. As economics reports come out from Australia, we will have better sense of what RBA might do.

Last Monday (March 2, 2015), Building Approvals report came out and it was very positive. It was expected at -1.8%. It came out at whooping 7.9% up 10.7% from previous -2.8%. It shows that more buildings are being built. Thus, creating jobs. However, Building Approvals reports show that building approvals tend to jump around every month. If the report continues to be positive, it might convince RBA to keep the rate unchanged.

Last Tuesday (March 3, 2015), Gross Domestic Product (GDP) came at 0.5%, up only 0.1% from previous report (0.4%). It came out little bit weak from what was expected, 0.7%. It’s still very weak and it might have larger impact on RBA’s future actions. I believe RBA will cut because GDP is not improving much.

Last Wednesday (March 4, 2015), Retail Sales and Trade Balance reports came out from Australia. Retail sales came out at 0.4% as expected from previous 0.2%.  Trade balance on goods and services were a deficit of $980 million, an increase of $480 million from December 2014 ($500 million). All these numbers are in seasonally adjusted term. I believe the gap in Trade Balance from the last two reports might convince RBA little bit to cut the rate again.

I would be short on AUD. I believe it has the potential to go further down to 0.7500. The best pair would be to short AUD/USD (Positive U.S news and upcoming rate hike).

AUD/USD Hourly
AUD/USD – Hourly

United Kingdom: 

Last Thursday, Bank of England (BoE) kept the interest rate unchanged at 0.50% and Quantitative Easing (QE) programme at £375bn. In March 2009, the BoE’s Monetary Policy Committee (MPC) unanimously voted to cut the interest rate to 0.50% from 1.00% (-.50%). The interest rate still stays unchanged and QE stays steady, for now. If future economic reports such as wages, and inflation declines or comes out negative, rate cut might come. If it does not, rate hike might come sooner than expected. I believe it will get better and MPC will decide to raise the rate, sending Pound (GBP) higher.

This week, Pound (GBP) fell after rising last week, due to little negative news from UK and that BoE rejected higher rate for some time being because of concerns in oil prices and inflation. I would not trade GBP at this time. If I’m going to trade GBP, I would analyze its chart first. Did you notice that last week GBP/USD had-daily bearish engulfing pattern and this week there is-weekly bearish engulfing pattern?

GBP/USD - Daily
GBP/USD – Daily
GBP/USD - Weekly
GBP/USD – Weekly

Canada:

Last Tuesday (March 3, 2015), Canadian Gross Domestic Product (GDP) came out little positive at 0.3% from previous -0.2% on monthly basis. It was expected at 0.2%. On quarterly basis, it came out at 0.6% following 0.8% in third quarter.

Last Wednesday (March 4, 2015), Bank of Canada (BoC) left the interest rate unchanged at 0.75% following 0.25% cut last month. Ever since BoC cut the rate last month due to falling oil prices; oil prices has risen and been in $50 range. If oil price continue to fall, I believe they will cut the rate again. There is strong relationship between Canada and oil. As oil gets weaker, Loonie (CAD) gets weaker. Why? Canada is ranked 3rd globally in proved oil reserves. When making a trade decision on CAD, I would look at the oil prices. Of course, I would also look at news and technical. For example, if I want to trade USD/CAD, I would look at both U.S and Canada economic news (rate hike/cut, employment, etc) and technical on chart. If U.S economic news are strong, Canada economic news are weak and USD/CAD is just above strong support line, I would definitely go long on it. However, let’s say if USD/CAD is just below strong resistance line, I would wait for confirmation of a breakout and if the news are in my favor, I would go long.

Last Friday (March 6, 2015), Building Permits and Trade Balance reports were strongly negative. Building Permits came out at -12.9%, following 6.1% the previous month, expected of -4.2%. Trade balance on goods and services were a deficit of -2.5 billion, following -1.2 billion the previous month, expected of -0.9 billion. Both reports were negative, which sent CAD lower. At the same time, U.S non-farm payrolls came out strong, which sent USD higher. As a result, USD/CAD skyrocketed. The reports will definitely be on BoC committee’s mind. As of right now, I would be short on USD/CAD.

This week, USD/CAD was mixed as BoC kept the interest rate unchanged, after cutting it last month (negative for USD/CAD) and strong U.S jobs report (positive for USD/CAD). I would be short on it as I said in the last paragraph.

USD/CAD - Hourly
USD/CAD – Hourly

United States:

Last Friday (March 6, 2015), U.S jobs report came out very strong except the wages. Employment increased by 295,000 (Expected: 240k) and unemployment rate went down 0.2% to 5.5% (Expected: 5.6%). However, average hourly earning fell 0.1%, following 0.5% the previous month (Expected: 0.2%). But, that hourly wages part of the report did not stop U.S Dollar from rising. It was very positive for the U.S dollar because there is little higher chance of rate hike coming in the mid-year.

Since U.S economic news tends to have impact on global markets, here’s what happened; U.S Dollar rose, U.S stock fell, European stock rose, Euro dived, Gold prices fell and Treasury Yield jumped. EUR/USD fell to 1.0838, lowest level since September 2003. USD/JPY rose to 121.28, a two-month high.

So why did U.S stocks sold off? It sold off because of upcoming rate hike, which can be negative for equities, specifically for dividend stocks. As economy is getting better, it should help boost corporate profits. At the same time, strong dollar can hurt them. Rate hike can only make dollar even stronger.

In two weeks, the Fed will be meeting and I believe they might drop the “patient” in its March policy statement.

I would be long USD. The best pairs would be to short EUR/USD (Euro zone delfation, Greece crisis and QE program) and short NZD/USD (RBNZ keeps saying that NZD is too high and they will meeting next week, rate cut?) as I’m already short NZD/USD, and long USD/JPY (Upcoming U.S rate hike and extra stimulus BoJ might announce).

Dow Jones Industrial (DJI) - Hourly
Dow Jones Industrial (DJI) – Hourly
Nasdaq - Hourly
Nasdaq – Hourly
Standard & Poor 500 (S&P 500) - Hourly
Standard & Poor 500 (S&P 500) – Hourly
USD/JPY - Hourly
USD/JPY – Hourly
NZD/USD - Daily
NZD/USD – Daily

Follow my twitter account @Khojinur30 or just click twitter icon on the top right to be directed to my twitter account, for my views that are posted any time. Thank you.

Central Bank Meeting Minutes: BoE, FOMC and ECB (Update on Greece)

During the week of February 16, 2015, BoE (Bank of England), FOMC (Federal Open Market Committee) and ECB (European Central Bank) released its meeting minutes for the latest monetary decisions. Let’s go in depth of these meeting minutes and how we can apply them to our trading decisions.

 

Bank of England (BoE) – (February 18, 2015)

The Bank of England meeting minutes showed that the Monetary Policy Committee (MPC) voted unanimously (9 members) to keep the benchmark interest rate unchanged at a record-low of 0.5%. There were hints it could be lowered in the next few months (yes, decrease, not increase). Two committee members, Martin Weale and Ian McCafferty who voted in favor of rate hike previously, were in favor in holding rates this time. Regarding its inflation in which Consumer Prices Index (CPI) fell to 0.3% (lowest since decades ago) last month changed the views of MPC. Some worry that it might slip below zero in the next few months. It has caused some to suggest rate cut over the next few months. The rate cut hinted in the minutes is totally different than what the Bank of England governor, Mark Carney said last week.

Mark Carney spoke to the press at Inflation Report press conference. He signaled that BoE remains on course to raise interest rates in the U.K. next year, despite decline in inflation. He also mentioned that BoE might cut the interest rate if inflation transforms into deflation (below 0). I believe if the inflation falls below 0, the BoE will cut the interest rate by 0.25, but only for short period of time. However, he pointed out that BoE still expects its next move will be raising rates, not cut them.

There are confusions going on with BoE on interest rate. I look at this way; inflation goes below 0, rate cut will come, inflation starts to increase, rate increase will come, and watch out for future statements by BoE for more clues. I would not trade Pound (GBP) based on these interest rate talks, for now. There is no clear road for interest rate for now. But, I would trade based on other news/events and charts’ technical.

 

Federal Reserve – (February 18, 2015)

The Federal Reserve meeting minutes showed that the Federal Open Market Committee (FOMC) expressed concerns over raising interest rates too soon, which could could halt or slow the U.S economic “recovery”. They are also worried over the impact of dropping “patient” from central bank’s rate guidance. They thought that removing “patient” from the FOMC statements in the future would put too much weight on its meaning. As a result, it would cause financial markets to overreact (Unlike Swiss National Bank, Federal Reserve cares about financial markets movements). If “patient” is dropped, I would think that interest rate hike is coming in the next two meetings. They also worried about falling inflation expectations in the U.S. If the inflation drops, I believe it’s going to halt (not cut) FOMC from raising the interest rate, but not decrease the rates.

In the minutes, it’s mentioned that there are worries about international events such as Greece (Greece got 4 month bailout) and Ukraine (There’s no “truce”). But, it’s not going to keep them from raising the interest rate, backed by strong jobs reports. However, the federal reserve signaled its willingness to keep interest rates low for longer because of strong U.S dollar and “flat” housing market. Raising interest rates will only send U.S higher, making it much stronger than ever.

On February 24 and 25, Fed Chair Janet Yellen will be speaking in congressional testimony and we should look for further clues to the timing of the interest rate hike.

Any clues of earlier rate hike will send U.S. dollar to rise in which I would go short USD/JPY, USD/CAD, and/or long GBP/USD. Remember, don’t hold your trade positions for more time if you trigger market order just based on what Yellen said, unless there are other news and technical to support your trade.

 

European Central Bank (ECB) – (February 19, 2015)

The European Central Bank first ever meeting minutes showed fears of continued deflation the euro zone, which led to launch of Quantitative Easing (QE) program which starts in March. The main goal of QE is to drag the euro zone out of deflation and near to 2% inflation target. This first minutes doesn’t reveal much of anything. Since there weren’t any new details or “surprising” details, the markets, especially Euro did not move much.

Europe has agreed to extend its financial lifeline to Greece only for 4 months. The deal was stuck last Friday (February 20, 2015). This is another bailout for Greece. How long does Euro has to keep bailing out Greece from the mess Greece made? The deal is not final if Greece does not come up with its plan by Monday (February 23, 2015). Then, it will be voted by institutions involved in the bailout by April. If the institutions do not back the plan, the “deal” becomes “no deal”.

I would still keep an eye on Greece. If you trade Euro, be careful with news coming out of Greece. It will be violent and may cause you to have losing positions or touch stop loss (or make money). When picking Euro to trade, I would pick pairs other than EUR/USD.

If you have any questions, feel free to leave comments or contact. Thank you.