EUR/USD: The ECB has ability to limit impact of Greek crisis says TD Securities, which continues to forecast the euro within a range for now

In a note published today, TD Securities focuses on the forex implications of the referendum to be held in Greece on 5 July.

"In the short term, the euro area should survive no matter the outcome of the crisis in Greece. The exposure of European banks to the Greek banking system has been significantly reduced. A large majority of the Greek public debt is now owned by European public creditors.

The ECB indeed has the means to calm the currently rising volatility. If peripheral spreads widen, the ECB's QE programme could be accelerated this summer.

The markets are aware of the ECB's capacity to intervene and this explains why the decline of the euro has so far been limited despite the circumstances. After an initial fall to 1.0951, the pair has indeed rebounded yesterday up to 1.1276.

In the end, the euro should continue to evolve within a range unless the exit of Greece from the euro zone takes shape, and in this case, the Euro could test the lower zone at 1.05 in 2015.

Lastly, we note that in the longer term, if the euro-dollar falls significantly below parity, we could see coordinated action by G7 central banks in response to this."