I think we can finally say this week that Forex traders aren’t really paying much attention to Greece anymore, and regardless of the Grexit and re-election results, any possible EURUSD gains will be drowned out by Spain. The official fork in the knife was this week’s EURUSD gap higher opening following weekend polls that showed a widening lead for Greece’s pro-bailout parties. The gains were short lived as Forex traders put their attention back on Spain and specifically last Friday’s news that Bankia, Spain’s third largest bank was being taken over by Spain. (In our Forex analysis post we offered a little more color on Spain and the few options that the country has going forward)
With the Forex markets decisively putting their attention on Spain and potentially Italy, the EURUSD looks primed to be a solid short if it is seen gaining on any Greece related news as we near that country’s elections. Specifically, Forex traders should be on the lookout for election polls and the like that point to Greece staying in the EU. Any EURUSD strength that isn’t based on an overall EU solution looks more likely to be short lived and worth shorting.