Europe Scrambles After Greek Election

The spot currency market (Forex) opens for the week every Sunday at 5pm EST. This makes it the first market to “digest” news that emerged over the weekend.

So what did it think of the latest news out of Europe? It was optimistic at first… but that optimism quickly faded.

We can see this in the chart, which shows how the Euro (EUR/USD) traded before and after the weekend’s Greek election. This was easily the most widely anticipated “market moving” event of the year so far.

See larger image

The blue circle highlights the higher “opening gap” in the euro. An opening gap occurs when the opening price of one day is not the same as the closing price of the preceding day.

In this instance, the euro closed on Friday at about 1.2650. Then, by the open on Sunday, euro buyers were suddenly willing to pay almost 1.2700.

Initially, this higher opening gap seemed to be a bullish sign for the euro. It appeared the market was expecting a stronger currency as Greece elected the New Democracy party leader, and pro-bailout candidate, Antonis Samaras.

But that optimism lasted just a couple of hours. By 5am on Monday the opening gap had closed. The euro was back down below 1.2650, where it was trading last week.

This is an ominous sign for the euro. Watch for it to go lower, with much volatility, as the market watches Europe scramble.

If you haven’t done so already read the Survive & Prosper issue on “Why The Greek Government Can Never Do What Iceland Did”.

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Categories: Economy

About Author

Adam O'Dell has one purpose in mind: to find and bring to subscribers investment opportunities that return the maximum profit with the minimum risk. Adam has worked as a Prop Trader for a spot Forex firm. While there, he learned the fundamentals of trading in the world’s largest market. He excelled at trading the volatile currency markets by seeking out low-risk entry points for trades with high profit potential. An MBA graduate and Affiliate Member of the Market Technicians Association, Adam is a lifelong student of the markets. He is editor of our hugely successful trading service, Cycle 9 Alert.