• Dollar Gives Up Early Gains as Risk Appetite, Euro Rally
  • Euro Unfazed by EU Finance Ministers Demand for Greek Austerity
  • British Pound Gains Versus Dollar, Yen on Sentiment Alone
  • Japanese Yen: Market Discussion Turns to Stimulus Conspiracy
  • Canadian Dollar Loses Ground Across the Board as Retail Sales Approaches
  • Australian Dollar Tumbles after RBA Minutes Say Data Does Add Rate Urgency
  • Gold Tempers its Advance As Credit Thaws, Ahead of Fed Decision

Dollar Gives Up Early Gains as Risk Appetite, Euro Rally

Through the opening hours of the new trading week, the dollar was recovering lost ground. With Asian equities falling back and news suggesting Greece’s conundrum would worsen before it improved, there was a distinct appeal for the traditional reserve currency. Yet, neither this demand for safety nor the dollar’s climb would hold up through the day. Despite the carry over risks from the previous week (a Euro-born credit squeeze, the impending expiration of QE2 and building speculation for economic expansion too cool); there wasn’t a catalyst influential enough to leverage momentum and carry the shift in capital from relative risk to relative safety to the next critical leg of its evolving trend. As such, the market fell back onto its more speculative bearings with traders looking to jump in and bid temporarily depressed assets. The mid-day reversal would turn the tables on all the majors before the official US open and seem to tighten the correlation between the dollar-based pairs and traditional risk-sensitive asset classes. Normally, when these otherwise independent assets sync up; it is a reflection of a strong underlying fundamental current. Yet, moving into temporarily depressed assets is something the market does when there isn’t a more prominent driver.

Through Monday’s close, with the swing in relative investor sentiment, the Dow Jones FXCM Dollar Index would put in for a distinct bearish reversal – retracing all its early gains and ensuring a lower high than the previous two active trading sessions before it. Digging deeper to assess conviction in the intraday reversal; we refer to the tepid volume readings on key benchmarks. The aggregate volume reading on Euro futures dropped off sharply to 241,015 contracts; turnover on S&P 500 Emini futures fell back to a four-week low 1.68 million contracts; and Treasury Future volume barely cracked the ‘million’ mark. This is not the kind of turnover that speaks to conviction and the genesis of a lasting trend.

A meaningful explanation for this lack of momentum is the general lack for fundamental explanation. Not only was the US economic docket light; but the official listings for all the season benchmarks were lacking for guidance. Though, a few interesting headlines to take note of was the weekend discussion that Russia was looking to further reduce its holdings of US Treasuries after having already sold an estimated 30 percent of its exposure last year and a Bloomberg article that notes that the S&P 500 is at its cheapest level (from a price-earnings perspective) in over a quarter century. We should keep an eye on the major economies’ (China, Japan, Russia, etc) efforts to work off their US debt exposure as the lack of a natural buyer to replace the Fed’s unnatural involvement could encourage the central bank to maintain its unorthodox support for a longer period. Looking ahead to the upcoming New York session, we have existing home sales; but it is unlikely to be a trend-defining event.

Related:Discuss the Dollar in the DailyFX Forum, John’s Picks: Short-Term Setups Like GBPCAD and EURJPY Best in Current Conditions

Euro Unfazed by EU Finance Ministers Demand for Greek Austerity

Many market participants were holding their breath over the weekend as the European Union policymakers gathered to discuss Greece’s predicament. It has become a rather consistent trend that this group reaches a consensus and throws in its support just when the market is on the precipice and it seems investors are readying to abandon all perceived risk. Perhaps the circumstances aren’t dire enough; because the group wouldn’t reach a consensus on releasing additional aid to Greece at the conclusion of the discussion. Instead, the group seems set on requiring additional budget cuts from the troubled nation before further assistance is released. That could be an issue as the political situation in Greece seems to be heading down the path of greater resistance to austerity. The confidence vote in the reshuffle of Prime Minister Papandreou’s cabinet is scheduled for today. The market seems overly confident in an austerity-favorable outcome (a passing vote).

British Pound Gains Versus Dollar, Yen on Sentiment Alone

With euro fears easing and risk appetite advancing through Monday’s session, the pound would find its way higher against its more liquid counterparts (dollar and yen). However, the positive implications for limited fallout from further Greece pain is as temporary for the sterling as it is for the euro. In the upcoming London session, we’ll once again test the balance of austerity and growth with public lending figures.

Japanese Yen: Market Discussion Turns to Stimulus Conspiracy

An interesting story initially reported by Nikkei Monday suggests that there is heavy speculation that the Bank of Japan has tied its ETF purchases directly to days when the Topix Index drops more than 1 percent through the opening session. This has a distinct effect on underlying risk trends at it works to prevent selling momentum from building from one day to the next. This is not a very far-fetched effort…

Canadian Dollar Loses Ground Across the Board as Retail Sales Approaches

The Canadian dollar wouldn’t show much progress through the opening 24 hours of the trading week – not unusual considering there were no direct fundamental developments and the currency’s link to risk trends is relatively weak. In the upcoming North American session, however, we have high-level event risk in April retail sales figures. Furthermore, this data is set against a sharp drop in rate expectations this past session.

Australian Dollar Tumbles after RBA Minutes Say Data Does Add Rate Urgency

What really changed in the RBA’s tone that the Australian dollar would drop nearly 70 pips against the greenback after the release of the central bank’s minutes? A few highlights from the release include suggestions that it was “prudent†to keep rates steady and the suggestion that no-resource areas of the economy were “subdued.†None of this is surprising though; nor relevant. This has more foundation in risk than rates.

Gold Tempers its Advance As Credit Thaws, Ahead of Fed Decision

Aside from a sharp, intraday rally and subsequent retracement; gold was fairly inactive through Monday’s session. Uncertainty in the Euro Zone’s situation is doing more to anchor the metal as a currency alternative than it is to blindly send investors bidding it up. With the recent jump in liquidity demand easing back and the Fed decision due after Greece’s vote, this market may be immobilized for another 36 hours.

For Real Time Forex News, visit: http://www.dailyfx.com/real_time_news/

**For a full list of upcoming event risk and past releases, go to www.dailyfx.com/calendar

ECONOMIC DATA

Next 24 Hours

GMT

Currency

Release

Survey

Previous

Comments

4:30

JPY

All Industry Activity Index (MoM) (APR)

1.8%

-6.3%

Expected to gain as funds reach industries

7:00

CHF

Money Supply M3 (YoY) (MAY)

6.9%

Low rates may foster growth

8:30

GBP

Public Finances (PSNCR) (Pounds) (MAY)

6.6B

3.3B

Net cash expected to continue growing as low rates do not deter spending even as economy slows down

8:30

GBP

PSNB ex Interventions (MAY)

17.0B

10.0B

8:30

GBP

Public Sector Net Borrowing (Pounds) (MAY)

16.5B

7.7B

9:00

EUR

German ZEW Survey (Current Situation) (JUN)

90

91.5

Regular confidence survey suggests cracks are starting to form as imports, manufacturing hurt, peripheral weakness

9:00

EUR

Eurozone ZEW Survey (Economic Sentiment) (JUN)

6.1

13.6

9:00

EUR

German ZEW Survey (Economic Sentiment) (JUN)

-3

3.1

10:00

GBP

CBI Trends Total Orders (JUN)

-5

-2

Industrial trends expected to have slower recovery behind economy

10:00

GBP

CBI Trends Selling Prices (JUN)

26

24

12:30

CAD

Leading Indicators (MoM) (MAY)

0.5%

0.8%

Decline expected as US demand slows

12:30

CAD

Retail Sales (MoM) (APR)

0.4%

0.0%

Higher sales could mean additional pressures on BoC to raise rates

12:30

CAD

Retail Sales Less Autos (MoM) (APR)

0.6%

-0.1%

14:00

USD

Existing Home Sales (MAY)

4.80M

5.05M

Another month of falling home sales could cement worry of slowdown into summer

14:00

USD

Existing Home Sales (MoM) (MAY)

-5.0%

-0.8%

22:45

NZD

Current Account Balance (1Q)

-0.900B

-3.524B

Account balance expected to slowly climb out of deficit, but earthquakes hurt tax revenue generation

22:45

NZD

Current Account Deficit-GDP Ratio (2011)

-4.3%

-2.3%

GMT

Currency

Upcoming Events & Speeches

1:30

AUD

Reserve Bank’s Board June Minutes

9:30

CHF

KOF Institute June Economic Forecast

EUR

Greek Parliament Vote of Confidence

SUPPORT AND RESISTANCE LEVELS

CLASSIC SUPPORT AND RESISTANCE – 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist 2

1.5160

1.6750

89.00

0.9345

1.0275

1.1800

0.8400

122.00

146.05

Resist 1

1.5000

1.6600

86.00

0.8900

1.0000

1.1000

0.8215

118.00

140.00

Spot

1.4298

1.6186

80.26

0.8469

0.9802

1.0562

0.8083

114.74

129.91

Support 1

1.4000

1.6050

80.00

0.8300

0.9500

1.0400

0.7745

113.80

125.00

Support 2

1.3700

1.5750

75.00

0.8250

0.9055

1.0200

0.6850

105.50

119.00

CLASSIC SUPPORT AND RESISTANCE –EMERGING MARKETS 18:00 GMTSCANDIES CURRENCIES 18:00 GMT

Currency

USD/MXN

USD/TRY

USD/ZAR

USD/HKD

USD/SGD

Currency

USD/SEK

USD/DKK

USD/NOK

Resist 2

13.8500

1.6575

7.4025

7.8165

1.3650

Resist 2

7.5800

5.6625

6.1150

Resist 1

12.5000

1.6300

7.3500

7.8075

1.3250

Resist 1

6.5175

5.3100

5.7075

Spot

11.8773

1.6028

6.7836

7.7918

1.2366

Spot

6.4123

5.2173

5.5406

Support 1

11.5200

1.5040

6.5575

7.7490

1.2145

Support 1

6.0800

5.1050

5.3040

Support 2

11.4400

1.4725

6.4295

7.7450

1.2000

Support 2

5.8085

4.9115

4.9410

INTRA-DAY PIVOT POINTS 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist 2

1.4409

1.6302

80.56

0.8574

0.9879

1.0680

0.8161

115.83

131.00

Resist 1

1.4354

1.6244

80.41

0.8522

0.9841

1.0621

0.8122

115.29

130.46

Pivot

1.4272

1.6177

80.22

0.8464

0.9811

1.0559

0.8084

114.44

129.69

Support 1

1.4217

1.6119

80.07

0.8412

0.9773

1.0500

0.8045

113.90

129.14

Support 2

1.4135

1.6052

79.88

0.8354

0.9743

1.0438

0.8007

113.05

128.38

INTRA-DAY PROBABILITY BANDS 18:00 GMT

Currency

EUR/USD

GBP/USD

USD/JPY

USD/CHF

USD/CAD

AUD/USD

NZD/USD

EUR/JPY

GBP/JPY

Resist. 3

1.4494

1.6349

81.12

0.8577

0.9897

1.0705

0.8197

116.47

131.61

Resist. 2

1.4445

1.6308

80.90

0.8550

0.9873

1.0670

0.8168

116.04

131.19

Resist. 1

1.4396

1.6267

80.69

0.8523

0.9849

1.0634

0.8140

115.61

130.76

Spot

1.4298

1.6186

80.26

0.8469

0.9802

1.0562

0.8083

114.74

129.91

Support 1

1.4200

1.6105

79.83

0.8415

0.9755

1.0490

0.8026

113.87

129.05

Support 2

1.4151

1.6064

79.62

0.8388

0.9731

1.0454

0.7998

113.44

128.62

Support 3

1.4102

1.6023

79.40

0.8361

0.9707

1.0419

0.7969

113.01

128.20

v

Written by: John Kicklighter, Senior Currency Strategist for DailyFX.com

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