SYNERGY FX FOREX MARKET ANALYSIS BY TODD DEITERICH | 25.06.15

THE ECB GOES NUCLEAR ON GREECE After five months of erratic negotiations between the Syriza party and its European lenders, the European Central bank (ECB) has emerged as the dominant player in finalizing the discussions to get an "in-or-out" verdict on Greece. The ECB has increased the Emergency Liquidity Assistance (ELA) to the Greek Central Bank for the last five consecutive business days. The total ELA assistance to Greece is now over €100 billion. An accelerating flow of Euros out of Greek domestic banks pretty much offsets the recent daily ELA inflow. This means if the ECB decides not to allow Athens to print anymore Euros, capital controls won't be far behind. As a reminder, the original negotiations between Syriza and the Troika (IMF, EU and ECB) back in January was over a €7.2 billion extension of credit. So why would the ECB continue to pour billions of Euros into a Greek banking system which is clearly close to insolvent? Synergy FX believes the ECB wants to keep Greece in the European Monetary Union (EMU) as a rationale for expanding their QE operations and broadening the maturities of upcoming QE purchases of Eurozone debt. ECB Chief, Mario Draghi, has expressed the view that getting Greece to agree to structural reforms is pointless without restoring competiveness and growth to the Greek economy. We interpret this to mean that the Greek economy, along with the other peripheral EZ members, would benefit greatly from a managed devaluation of the Euro from the ECB. As such, our base case is that some type of "extend-and-pretend" agreement will be reached over the next few days, Greece will remain in the EMU (even with capital controls) and the ECB will become more vocal about moving sovereign rate differentials against the EURO. The break of initial support at 1.1325 on Monday has put the June 5th Non-farm payroll low of 1.1048 back within reach (see chart). Greek news will likely dominate flows with US weekly jobless claims and Personal Spending data also scheduled. Synergy FX expects daily resistance at 1.1245/50 to hold on the day for day traders. The AUD/USD remains in the .7815 to .7600 range with daily lows seen consistently in during the US session. The downward bias is supported by lower commodity prices but downside momentum has been lacking. The closest pivot is the daily parabolic switch-point at 7675, which should lead to range extension to the .7615 area. The short GBP/USD trade is gaining momentum from 1.5825 but with no first tier data today we could

see some back and filling up to 1.5760. Synergy FX still prefers the short side of EUR/GBP into the .7170 area. The USD/JPY has found resistance in the 124.20 are the last two sessions but has remained firmly over the 30 day moving average at 123.10 (see chart). We can't rule out a re-test of this level on SP 500 weakness but will suggest long positions in this area for an initial target of 124.75 and a stop at 122.60. SYNERGY FX