By Richard Rittorno
Be on the lookout for the real possibility of currency market volatility as leaders have suspended Greece debt talks once again. If Greece does not receive a bailout by late March, it will face bankruptcy. But as the country remains in a deep recession with unemployment at 19%, many politicians and unions oppose more austerity measures.
Greek coalition leaders attended a five-hour meeting late Sunday with Prime Minister Lucas Papademos to finalize a deal with the debt inspectors representing euro zone countries and the International Monetary Fund. Unfortunately, they failed to come to an agreement.
Papademos announced the three party leaders agreed on spending cuts for 2012 of 1.5% of gross domestic product: about 3.3 billion euros or $4.3 billion. The three also agreed on improve competitiveness by cutting wages and non-wage costs, which include Social Security contributions, reduced auxiliary pensions and re-capitalization for banks without nationalizing them.
The three leaders, however, differed as to what would actually be in the detailed proposal for achieving these goals.
Unions and employers’ associations have also raised their concerns and warned that additional cuts to private sector wages would send the nation deeper into recession.
Nearly 60 people protected outside of the parliament Sunday evening and when they attempted to block traffic, police using tear gas to push them back. Communist-affiliated unionists are holding a protest rally and as well as a march Monday.
The euro will be taking the brunt of the indecision and signals are suggesting a move lower. Traders looking to take advantage of the strong EUR/USD can look to sell the EUR/USD from $1.3118 to $1.31836 with a protective stop loss at $1.32821
For those looking to use the CurrencyShares Euro Trust ETF (FXE) as alternative to the forex market, selling points are at $130.97 to $131.64 with a protective stop loss at $134.
Both trades are set up to let traders grab possible sharp downside moves on any negative news out of Greece and the euro zone.
