Greece's Eleventh Hour: How To Trade It In FX? - Barclays

In its weekly note to clients today, Barclays Capital weighted on the latest developments of the Greek crisis, recommending a couple of FX trades this week. The trades are macro-technical driven.

"The Greek political saga has taken a sudden and potentially climactic turn, following the Greek government’s decision to call for a surprise referendum on the terms of the Greek bailout... we think it almost certain the Greek government will be unable to make the 30 June IMF payment, which also coincides with the end of the current bailout program," Barclays projects.

FX implication:

"The escalation of political uncertainty in Greece will likely imply a cautious stance from investors, who we believe will demonstrate a broad-based flight to quality. Under a risk-off environment, we expect the USD and the JPY to benefit in FX, while we look for high-beta currencies, including commodity currencies, and the EUR to come under pressure in the coming week," Barclays argues.

The trades: Sell EUR/JPY & Buy USD/CHF:

"We recommend staying short EURJPY spot and also like being long USDCHF spot. We expect the EUR to come under pressure in the coming week as the Greek political uncertainty escalates further and like staying short EURJPY. We also like being selectively short CHF given our expectations that it will likely underperform higher-quality safe-haven currencies such as the USD. More broadly, USDCHF appreciation should be supported by a strong US employment report later in the week as well," Barclays says as a rationale behind this call.

"Being long USDCHF would of course also be a compelling trade under a scenario of an eventual resolution. Fundamentally, and once the near-term uncertainty dissipates, we expect market interest in long USD positions to pick up again, as we envision another leg of appreciation, particularly against the EUR, in the coming months," Barclays argues.

"Technically, we are bullish USDHF and would look to buy against support near 0.9070. Closing the week above the 0.9280 area confirms a bullish engulfing candle and signals further upside in range. Our bullish conviction would be further encouraged by a move through initial upside targets near 0.9545. Beyond there we are looking for gains towards the 0.9865/0.9905 area and then higher towards greater targets near the 1.0130 reaction high," Barclays adds.

This content has been provided under specific arrangement with eFXnews.