Technical Bias: Slightly Bullish
- EURUSD rallied above 1.1200 as Greece taps into emergency reserves to make IMF loan payment.
- Greece makes payment by using €650 million from an IMF escrow account, as well as by tapping into cash reserves.
- Varoufakis warns that Greece’s financial situation becoming “terribly urgent.”
The EURUSD rebounded on Tuesday, as Greece tapped into emergency reserves to make a crucial loan payment to the International Monetary Fund while the country’s fate in the Eurozone continued to hang in the balance.
The EURUSD extended gains well beyond 1.1200, surging more than 100 pips to a daily high of 1.1277. It would subsequently consolidate at 1.1235, advancing 0.7 percent. Initial resistance is located at 1.1268, the high from April 30. A break above this level would lead to 1.1300. On the downside, initial support is located at 1.1332, the daily low.
Greece Repays IMF
Greece tapped into its emergency reserves on Monday to make a crucial €750 million loan payment to the IMF, helping it stave off an unprecedented default. Athens used €650 million from an escrow account at the IMF and secured the other €100 million from cash reserves, according to a Syriza official. While the move has raised some optimism that Athens intends to repay loans, it also signals that the government has all but run out of funds, putting it on a collision course with default.
The Greek government owes the IMF a total of €9.7 billion this year.
Efforts to reach an agreement on a new bailout structure have all but failed over the last five months. Greece and its creditors were unable to lift the bailout impasse over the weekend after Athens said it was unwilling to compromise on key election promises tied to pensions and wages. These “red lines” made it virtually impossible for Eurozone finance ministers to ratify an agreement at Monday’s Eurogroup meetings.
Greek finance minister Yanis Varoufakis has called his country’s financial situation “terribly urgent.” While acknowledging that “progress” has been made, he warned that Greece’s cash crisis may come to a head within “the next couple of weeks.”
Athens has until the end of June to finalize an agreement with its creditors. A failure to do so increases the prospects of an unprecedented default, which could result in Greece exiting the euro.