A market that had almost fully priced in a Greek bailout agreement got slapped in the face after yet another failure to deliver by EU finance ministers, unable to close the gap on how to help Greece's state of bankruptcy.
The disappointment in the market resulted in a major sell-off against the likes of euros, with the EUR/USD pair falling like a rock from 1.2820, high of Asian trade, all the way to levels below 1.2740.
The 80+ pips slide portrays the inequality between the pre-EcoFin meeting expectations, where a partial or even total agreement was eyed, and the actual outcome, which suggests traders differences between the EU and the IMF are still obvious and hard to resolve.
German finance minister Mr. Schaeuble said the EZ FinMins will resume talks next Monday, adding that "since the questions are so complicated we didn't come to a final agreement, so we'll meet again."
Meanwhile, IMF chief Ms. Lagarde said "Eurogroup made some progress, although more work is needed." EU's Juncker said 'technical work' still needed on Greek program, he doesn't know when the next Greek disbursement will happen, and also adding "we made progress on a package of steps to cut Greek debt, and we will continue on November 26."
As Kathy Lien, Founder at BKAssetManagement, notes: "EU finance ministers don't want to rush a decision on Greece but they are also know that they are running out of time. Aside from the disbursement of the next aid payment, Finance Ministers are also discussing debt restructuring, a possible moratorium on interest rate payments on EFSF loans, which would save Greece EUR 44 billion and reduce interest rates on bilateral loans."
The major disappointment on Greece, has set the stage for a meaningful shift of sentiment in the market as we enter the equator of trade this Wednesday. The disruptive anti-euro flows may last longer than recent committed risk buyers may digest, and as a result, renewed selling interest may enjoy significant follow through into the end of the current trading week.
Valeria Bednarik, Chief Analyst at FXstreet.com, stated before the EcoFin meeting that failure to deliver, "will likely see the pair back nearing 1.2745 area where buying interest may resurge..." So far, this has been the case, with the EUR/USD setting new week lows just below 1.2740 before a shallow bounce sent the spot rate to retest 1.2750/55.
According to Sean Lee, FXWW Founder, reaction to EZ finance ministers headlines are way overdone: "The market hadn't categorically expected any developments from the FinMin meeting but I guess the fact that it went on for so long has the market now expecting bad news. The postponement until Monday is usual EZ fare, so I think this sell-off is a bit overdone."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.