News & Analysis at your fingertips.

We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site. See our updated Privacy Policy here.



Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events


Economic Calendar

Economic Calendar Events

Free Trading Guides
Please try again
More View more
Breaking news

Federal Reserve Leaves Interest Rates Unchanged, Maintains Monthly Asset Purchases

Real Time News
  • Facebook Earnings Summary: Revenues: $29.08 B vs $27.89 B est. EPS: $3.61 vs. $3.03 est. $FB down ~5% in AH session
  • Update - gold extending its rally to session highs as the US Dollar continues to slide following this comment from Powell. The Fed Chair also stuck to his transitory inflation script during the presser. Meanwhile, real yields just hit new all-time lows. $GLD $DXY $XAUUSD
  • Indices Update: As of 20:00, these are your best and worst performers based on the London trading schedule: Wall Street: -0.00% US 500: -0.02% France 40: -0.09% FTSE 100: -0.13% Germany 30: -0.15% View the performance of all markets via
  • @DailyFX
  • Gold price action tumbles lower as the US Dollar strengthens broadly following the Fed. Get your $XAUUSD market update from @RichDvorakFX here:
  • Fed's Powell: - No sense of panic in regard to inflation - I do not believe wage increases are causing price inflation
  • Fed's Powell: - High inflation prints not "what we were looking for" - Spike in inflation driven solely by supply side shock
  • Fed's Powell: - We expect RRP activity to remain elevated - Repo facilities performing as expected
  • Fed's Powell: - MBS and tapering were brought up by a number of FOMC participants - We will taper both (MBS & Treasuries) at the same time most likely
  • Fed's Powell: - Strong capital requirements are a "must" for banks, especially the largest banks - Capital requirements allow banks to continue to perform during severe downturns
Forex Traders Positioned for the Worst on Greek Elections - Caution

Forex Traders Positioned for the Worst on Greek Elections - Caution

David Rodriguez, Head of Product

Upcoming Greek elections could force substantial volatility in the Euro and other major currency pairs, and a broad range of market indicators show that conditions show fears for the worst. DailyFX Currency Analyst Christopher Vecchio lays out the stakes and fundamental reasons for why Greek elections could materially change outlook for the Euro. Trader positioning likewise shows fear for the worst—how exactly?

Forex options markets show that 1-week volatility expectations are at their highest since the Euro/US Dollar topped near the $1.45 mark in October, 2011. According to Bloomberg’s options data, traders are pricing in as much as a 200-pip daily range for the Euro every day through next week. The last time the Euro set a 200-point Average True Range (ATR) over 5 days occurred as it set a short-term top at $1.38 (on 11/14/2011) and subsequently fell a substantial 370 pips from its peak in that same week.

Traders should remain extremely cautious and limit positions and especially leverage ahead of the weekend. The inability to close/open positions as election results are announced creates significant risk of outsized losses. When markets open, we likewise expect markets will be extremely volatile and difficult to trade.

Euro 1-Week Implied Volatility Levels At Highest Levels since Critical EURUSD $1.45 Top

forex_traders_greek_elections_fear_the_worst_body_Picture_5.png, Forex Traders Positioned for the Worst on Greek Elections - Caution

Data source: Bloomberg

Chart source:,

Why do traders fear the worst? Quite simply, a far-left party victory could effectively push the government of Greece into default as party leaders have made it clear they intend to issue a moratorium on debt repayments and renege on bailout agreements.

No regional government has defaulted on its debt in the Euro’s 13-year history, and most expect that a Greek default would force it out of the Euro Zone. The size of the Hellenic Republic’s economy suggests that it should have relatively little impact on the broader region. Yet the most significant risk is that a Greek default forces substantial strains in at-risk in the EMU’s third and fourth-largest economies in Spain and Italy.

We can gauge overall fear of Greek default by the yields investors require for long-dated bonds; high yields show strong expected risk of default. An extremely negative correlation between Greek Government 10-Year Bond Yields and the Euro/US Dollar emphasizes the importance of the weekend’s elections. If Greek 10-Year bonds surge as traders prepare for default, correlations suggest the Euro/US Dollar could fall even further.

forex_traders_greek_elections_fear_the_worst_body_Picture_6.png, Forex Traders Positioned for the Worst on Greek Elections - Caution

Data source: Bloomberg

Chart source:,

Given such clear risks to the Euro’s very existence, traders are quite clearly positioned for further declines. As of last week, large speculative futures traders were the most net-short Euro/US Dollar in history, while commercial hedgers were likewise at their most defensively net-long on record by a very large margin. Finally, FX Options traders are paying extremely largest premiums for aggressively bearish 1-Year EURUSD Options—underlining fears of substantial Euro weakness and ‘tail risk’.

Euro/US Dollar Futures and Options Traders Positioned for Aggressive Declines

forex_traders_greek_elections_fear_the_worst_body_EuroCriticalRisk.png, Forex Traders Positioned for the Worst on Greek Elections - Caution

Data Source: Commodity Futures Trading Commission, Bloomberg

Chart Source:,

The writing on the wall tell us that the Euro could fall substantially on sharply negative disappointments, and trader positioning likewise shows that many are betting on or hedging aggressively against EURUSD weakness. Yet there is absolutely no guarantee that Greek elections will produce such negative outcomes. Volatility expectations themselves predict that price moves could be substantial in either direction.

In fact, such one-sided bearish sentiment and leveraged bets warn that a positive surprise could force a significant Euro recovery. Traders should remain extremely cautious ahead of the weekend, limit leverage, and trade defensively following Sunday’s market open.

--- Written by David Rodriguez, Quantitative Strategist for

To receive this author’s reports via e-mail, send subject line “Distribution List” to

Contact this author via Twitter at

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.