Re-focus on fundamentals augurs for EUR/USD downside

With the Greek political uncertainty subsiding in the near term, following the Greek parliament passing the initial reform bills, the Eurogroup subsequently agreeing to the three-year ESM program and the German parliament backing the Greek aid talks, increased willingness of investors to re-engage in some of their core positions is seen.

Last week's price action was suggestive of the market's desire to move past the Greek political uncertainty and re-engage in fundamental positions, including using the EUR as the funding currency of choice and being short EUR/USD. 

Other than the second round of reforms that need to be approved in Greek parliament next Wednesday, attention should be focused on the Cabinet reshuffling Tsipras will shortly have to do, given that the government is no longer able to pass bills without at least some support from opposition parties.

"EUR will be bearish and supported by the ECB's commitment to its QE program. Indeed, the ECB will indeed continue its monthly asset purchases at the same pace until September 2016, and probably even longer as we believe the increase in inflation will likely be slower than the ECB currently projects", says Barclays. 

Moreover, the chance that additional measures will be announced by the end of this year is not negligible and will depend on financial market developments, especially in conjunction with upcoming discussions about the third Greek bailout.