Euro remains on bull's radar after 3rd bailout for Greece

Currency systematic strategies during the week we enhanced risk premia switched to a long yen and short Aussie position. The biggest longs are the USD, the JPY, the EUR and the GBP. The most sizeable shorts are the NZD, the AUD, the CAD and the NOK. The short position in NZD/USD and long position in USD/CAD are the USD crosses with the highest combined momentum and IR-driven FX signals.

The euro was boosted after European officials said an agreement on a new aid program for Greece had been reached.

The details of the agreement were to be announced a press conference later in the day.

Greece accepted a series of draconian measures demanded by its creditors in exchange for a third bailout deal.

The Greek parliament must approve a package of reforms on Monday and then pass several pieces of legislation by Wednesday, including on pensions reform and a new sales tax regime, before the euro zone will agree to negotiate a new three-year rescue package.

Greece had initially resisted two key demands from creditors on having the International Monetary Fund involved in the new bailout, and on a German demand for Greece to set aside €50 billion of state assets to act as collateral for fresh loans.

The euro inched higher against the yen with EUR/JPY touching highs of 137.79 before pulling back to 136.99. The dollar also hit session highs against the safe haven yen, with USD/JPY rising to 123.09.

The standard sentiment indicator has slipped further into the risk-averse area. Based on the adaptive (tailored) version of the sentiment indicators and the relevant time-series signals, we have established a short exposure to the G10 carry basket, we have re-opened the Asia carry basket, and we do not have exposure to EM carry.

The risk of the aggregate strategy remains confined and stands just at 7% annualized volatility. The strategy is up 14 bps this week and has had a flat performance so far in July.

We already proposed bull strategy on EURJPY during late Asian sessions. Now we come up with some more currency crosses involving euro in our upcoming posts.