It is interesting to take a step back and take a look at the bigger picture every once in a while. Ahead of the election this weekend there have been many pundits and locals making wild predictions about the outcome and the effects it may have. When in reality we have no idea what the outcome of the election will be. All we can do is prepared for a few possible scenarios. If the New Democracy party wins the Euro should rally. If the Syriza party wins the Euro will fall. Now there are a few shades of grey depending on if the new government has a majority or not and a possible coordinated intervention by central banks.
When we look at the price action of the EURUSD on a monthly chart we can see that the cross has retraced a bit this month to the .382 fib from last months lows. It isn't unusual for a pair to retrace back to the 50 Fib from the prior months move in any month. In fact not to test that level is against the norm. If the New Democracy party wins this weekend and establish a majority we could easily see a pop higher into the open next week up to the 50 or 618 fib level from last months lows at 1.2784 and 1.2902. If the Syriza party wins and central banks remain on hold we could see a test of last years lows around 1.1875. If the central banks intervene we could see a short pop in price action and a quick exit plan mapped out for Greece.
Now lets consider what would happen if we have a mixed result. Which is the most likely outcome.
A mixed result is a bit more complicated so lets just focus on price levels. I would expect sellers to come in on any move up towards 1.29 and buyers to protect the monthly lows around 1.23. In the middle the only way to play this pair is to wait for the open on Sunday. A spike higher will most likely be faded then push up towards new highs by the end of the week. A spike lower may find buyers anticipating a central bank intervention. All in all, this pair will be difficult at best to trade at the start of next week. With news pushing the cross in every which direction. The wise thing to do would to wait for the dust to settle or take a shot at an price extreme. I would play it small place my stops a bit wider.
Sup 1.23
Res 1.29
