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Greek Election: Meimarakis victory could push EUR/USD up to 1.1800

Once more, for the third time this year, the greeks are asked to vote in an election that is presented as crucial for the future of this damaged mediterranean country.

The triumph in January of Syriza, the left-wing party that wanted to revolutionize Greece, diluted in a few months. At the same time, the euro went down until reaching 1.0461, its minimum value since January 2003. By then, the general thought was that Greece would have to quit the euro after being unable to meet its scheduled debt payments and the austerity policies ordered by the so-called Troika.

However, just on the deadline, an agreement was reached: it was kind of expected that a last-minute negotiation would avoid a Grexit, which would have left its european partners with a debt that will not be repaid anyway.

The bailout proposal made to Greece is just an accounting formality. The greek debt can't be repaid by any means, so the whole thing just depends on the european creditors' will.

In a very risky move, Syriza's leader, Alexis Tsipras, called for a referendum to ask its people -who had just voted for him four months earlier- if they approved the bailout plan and the austerity measures proposed by its european partners. Greek people answered “no”.

And then, when everything seemed to point to a Grexit, Tsipras ignored the referendum and accepted the bailout proposal. That whole process demonstrated that everything was just a political circus and that a bankrupt nation has no chance of escaping Germany's pressure.

Tsipras immediately called for elections, trying to depressurize the situation and consolidate his new pro-european position. This vote is taking place next Sunday.

The opponent of Tsipras in this elections is Evangelos Meimarakis, the head of New Democracy, a right-wing conservative party.

The last polls published just hours before the elections are showing a very tight fight between Syriza and New Democracy: some give a little advantage to Meimerakis, while others still show Tsipras leading.

Whatever the result is on Sunday, Grexit is not on the table. Both candidates agree in meeting the conditions imposed by the creditors to avoid a new default. But this is where their common points end.

In our opinion, a Meimarakis victory would push euro higher, taking into account that Tsipras only accepted the conditions imposed under a lot of pressure by the creditors, while ND's leader would have done the same by belief. An electoral win from New Democracy could consolidate EUR gains in the short-term and give some breathing to the greek bond market.

Technically speaking, the common currency could take a more solid bullish run, nearing 1.18 zone, where there is a strong resistance zone in the 38.2% of the 1.3992/1.0461 move, before dipping back. Even if a Meimarakis triumph doesn't seem to be enough to carry the euro that high from the current level of 1.1430, a gap higher (to be filled quickly) on the Asian opening in Monday is very probable.

Anyway, EUR will be bearish in the mid-term. Even with the Fed holding the interest rates by now and hitting the USD -EUR only gained on USD weakness-, the €60B QE started by the ECB in March at least until September 2016 will be decisive. Even more if we take into account that the Fed will not wait much to hike interest rates. Therefore, Greece just seems to be transcedent in the short-term, but the euro will only be weighed by it for a few days before returning to a bearish trend that could carry on for several months.

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