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Risk appetite came roaring back in Asian session following a decent US session in stocks and the USD paid the price. But in our mind is more a minor correction then shift in direction. EURUSD rallied nicely off the 1.4200 support, climbing to 1.4384 while USDJPY was content trading in a tight 80.09 to 80.35 range. Commodities also go into the risk rally as Crude WTI moved up 91.14 to 94 and Gold rose to 1542.72 in Asia. The recently maligned Asian regional indices were able to seem somewhat buoyant as the Nikkei rose 1.10% and the heavily sold Shanghais composite up 0.52%.

This sudden rally in risk correlated trades have taken us slightly aback and today, most participants will be waiting with baited breath for the results of the Greece no confidence vote expected (by 22:00gmt). There is considerable evidence that the motion will be passed and the current government will be able to remain in control. This would clearly be a step in the right direction for Greece, as EU has tied any aid to further austerity. Given the ground swell support for rejecting the current austerity package by the Greece voters, there is considerable concern that any disruption in government could lead to rejection of any currently proposed spending cuts. Other events that the market is latching on to, for proof that a managed solution for Greece is coming down the pipe, were the comments from EFSF CEO Regling that the effective lending capacity of the EFSF would be increasing the size of the guarantees proposed by individual countries. Overall a positive vote in Greece and further supportive comments (slightly different tone than yesterday) should be supportive for the EUR.

However, we are concerned about the shallowness of the recent comments and  how ealistic given the challenging emacro environment. We have been caught in waves of optimism, just to risk appetite reverse (think Friday to Monday) so we would like to see more substantial activity than just a short 12 shift and non critical directional movement.

In Australia, the RBA minutes come in basically how we had expected, with a slight tightening bias. A key phrase was placed in todays minutes that was absent from May, stating (but in Governor Stevens prior speeches) “higher interest rates were likely to be required at some point if inflation was to remain consistent with the medium-term target”. Clearly RBA members recognize mounting inflation pressure but they are in no real hurry to further raise rates.

Today’s economic calendar is once again a light one, so FX traders will focus on Greece and Euro zone sovereign crisis.

07:00 CHF SNB Publishes Monthly Statistical Bulletin
07:00 CHF Money Supply M3 (May
08:10 GBP BoE’s Paul Fisher Speaks
08:30 GBP Public Finances (PSNCR) (May) GBP
09:00 EUR ZEW Survey (Econ. Sentiment) (Jun)
09:00 EUR GE ZEW Survey (Current Situation) (Jun)
09:00 EUR GE ZEW Survey (Econ. Sentiment) (Jun)
09:30 CHF KOF Institute June Economic Forecast
12:30 CAD Retail Sales (Apr) m-o-m 0.40% exp
12:30 CAD Retail Sales Less Autos (Apr) m-o-m 0.50%exp
14:00 USD Existing Home Sales (May) units
17:00 CHF SNB’s Hildebrand Speaks

The Risk Today: EurUsd Support now stands at 1.4183 (bullish trend support), then 1.4128 (17th June low) and 1.3970 (23rd May low). Should demand actually materialize in this low volume summer Tuesday1.4339-60 (17th June high & bearish trend floor) stands as first resistance, then 1.4497 (14th June high.

GbpUsd The cable getting a new lease on life and like the EUR feel very bullish right now. The break of 1.6235 resistance give scope for a broader short term move. There is not much till 1.6442 (14th June high).Support stands at 1.6226 (yesterdays high).

UsdJpy Not much action in this pair with daily ranges compressed. Last week’s failure to convincingly break & hold above daily cloud base at 80.89 suggests continued range bound action. Pressure on 80.00 (psychological key support) will tell if we can head back up to daily could covering or should look down towards 79.57 (5th May lows). Resistance stands at 80.68 (17th June high) then 80.89 (cloud base).

UsdChf Todays SNB comments failed to shift trader’s overall bullish CHF sentiment and general risk across the board has the CHF well in demand. We are expecting a continued reversal off 0.8850 (15th June highs) with 0.8443 providing the pairs first minor test. Critical support is located at 0.8328 (6th June low) then below completely uncharted waters. Resistance at 0.8551 (15th June high) should provide the first barrier than 0.8662 (27th May high)

Similar Posts:

• Events in Greece Hurt Risk Appetite
• Greek Crisis Still Rolling & Evidence of Contagion Mounting
• Markets Focus on Greece
• Risk Appetite Cools Slightly on S&P Warning
• Uncertainty Around Greece Remains