In its week by week note to clients today, BNP Paribas design the FX response to this present weekend's Greek decision, plotting the potential EUR response to a Yes/No vote close to the best EUR trade to position for such an event.
Raising news for Greece is shrewd news for the EUR.
"We continue persevering through that raising news on Greece identifies with horrible news for the EUR. The ECB's quantitative enabling framework (QE) is the key fragment driving down the EUR, as the single cash is used as the key financing coin for FX go on trades. EURUSD is twisted versus 2y rate spreads. Befuddling parts on Greece produce a danger off technique in business divisions that results in the releasing up of go on trades and getting back of the EUR. We believe this redirection will stay set up around Sunday's decision," BNPP battles.
EUR response to a Yes/No vote.
"A "yes" result should make a help rally in business parts and urge inspectors to again unite to EUR-fortified pass trades. This will drive the EUR lower. Then again, a "no" outcome may make new hazard lessening and a further discharging up of EUR shorts," BNPP winds.
EUR arranging into the comfort.
"Our BNP Paribas Indicator reports short EUR presentation at - 14 (on our size of - 50 to 50), which is a moderate short yet well underneath the trough of - 35 in January. This reason on FX is fortified by the relationship with edges spreads in the midst of the latest round of Greek procedures jumping out at February. The FX clarification is also tried and true with our ordinary response by the eurozone edges security business part, joining an overshoot in the mind-boggling inevitable result of the decision," BNPP notes.
How to play it? Offer EUR/JPY.
"A short EURJPY position also joins fairly a tail-danger divider. Like EURUSD, EURJPY appears in light of current circumstances distorted by veritable rate spreads. A stupor "no" vote would likely perform a sharp danger off event like that of Monday morning (29 June). In this condition the EUR would drop vehemently and the JPY would advantage as a position of safe house, especially as the business territory is not quickly running a net long JPY presentation," BNPP prompts.
