It's a big week for the US Treasury market with several key reports, including the payrolls. A strong outcome is preferable to keep September rate hike expectations alive. In Europe, both the Bund and German 10-yr yield broke key levels, improving the technical picture and suggesting more upside for the Bund. Currencies: dollar continues directionless trading pattern On Friday, the dollar lost slightly in technical trading . A the start of the new week, the global picture is little changed. Dollar bulls will wait for confirmation from better US eco data. Greece remains a binary risk for EUR/USD trading. As long as none of these issues is clarified, the dollar might stay in a wait-and-see modus. The Sunrise Headlines After a volatile session, US Equities ended 0.6% down on Friday. Losses were contained compared with Europe, where shares lost up to 2.5%. This morning, most Asian shares trade in positive territory. China continues to outperform despite weaker data due to speculation that the government is considering plans to double the size of the clean-up for local government finances. Greece missed yesterday its self-imposed deadline for reaching an agreement to unlock aid, despite constructive talks held yesterday. During the weekend however Greek Prime Minister Tsipras accused bailout monitors of making absurd demands and seeking to impose “hard punishment� on Athens. Growth in China's factory sector edged up to a six-month high in May, but export demand shrank and jobs were shed, the official manufacturing PMI showed this morning, with the headline index improving marginally, from 50.1 to 50.2. The PMI for the non-manufacturing sector extended its downtrend falling to the lowest level since December 2008. Crude oil prices jumped 5% on Friday after data showed an unexpectedly large drop in US drilling activity. The Brent oil price jumped back above $65/barrel, while the WTI ended the session above $60/barrel. On Friday, OPEC will meet in Vienna to decide on its policy. They are expected to keep its current production ceiling unchanged at 30 million barrels a day. The Czech Finance Minister proposed yesterday to hold a nonbinding public referendum in 2017 to let the public have a say in whether the country should adopt the euro. The Prime Minister however dismissed the idea, saying the country must adopt the euro, although there is no deadline for it. Today, the eco calendar is well-filled with the euro zone (final) and UK manufacturing PMI, the US manufacturing ISM, the German HICP inflation data and US personal income and spending data• Currencies: Dollar Continues Directionless Trading Pattern EUR/USD USD captured in directionless trading There was again no big story for USD trading on Friday. European equities were under moderate downward pressure from the open. However, the euro rather than the dollar profited from risk-off-sentiment with the euro being the preferred currency for funding carry trades. Later in the US trading session, there was no clear trend for USD trading. The US data were mediocre, at best, but there was no consistent reaction of the dollar. EUR/USD closed the session at 1.0986, from 1.0949 on Thursday evening. USD/JPY ended the week at 124.15 (from 139.95). Eco data unlikely to provide clear guidance This morning, Asian equities trade mixed. Chinese PMI's point to lacklustre growth momentum. Even so, Chinese equities outperform the region. Japan Q1 capital spending data were strong, but Japanese markets didn't know which way to go. The dollar started the week on a constructive tone, but stays close to recent levels. USD/JPY trended higher, but a retest of last week's 124.46 top didn't occur. The pair later returned to the 124 area. EUR/USD is off Friday's highs too. Dollar strength is part of the story, but the euro probably suffers from tough comments from Greek PM Tsipras Later today, markets look out to the EMU manufacturing PMI's and the German CPI. We see upside risks for the German CPI and there might be a marginal upward revision of the EMU PMI, too. Higher than expected EMU CPI data could be a (temporary?) supportive for the euro. For the US eco data (income & spending and manufacturing ISM) we see slight upward risks versus consensus. So, it is unlikely that today's data will break the stalemate on the currency market from the end of last week. Of course, the never-ending-story on Greece also continues today/this week. Greece repeats that a deal is within reach, but the lenders are far less optimistic. It is difficult for currency markets to handle this binary risk. The headlines today might stay rather negative. At the same time there is always ‘the risk' of Greece and its creditors finally reaching a deal. Such a scenario could trigger an uptick of the euro. At the end of the day, we think that the US data later this week (especially labour market data) will be more important for USD trading than the headlines on Greece Recently, the dollar traded stronger on rate hike hopes and the euro was in the defensive as political uncertainty came again to the forefront. This context is little changed at the start of the new trading week. Even so, the dollar rally took a breather at the end of last week, awaiting more confirmation from strong US eco data. We doubt that today's eco data will break the stalemate. In this context, the EUR/USD 1.10 area should be tough resistance. The eco context doesn't look that bad for USD/JPY. Even so, the USD/JPY rally shows some signs of fatigue. We stay cautious. Risk for a technical setback (profit taking move) is rising, especially if equities fall prey to profit taking. Longer term, we maintain a cautiously positive bias on the dollar. Recently, the dollar developed a bottoming out process. Interest rate differentials tentatively moved in favour of the dollar and the US eco data were moderately constructive. At the same time, the decline of the bund, which supported the euro early this month, stalled. The topside of the euro should be well protected. We assume that EUR/USD 1.1534 (early February top) will be difficult to break. A sustained further rebound of the dollar needs confirmation that the US Q1 dip was temporary. This might take time. A EUR/USD sell-on upticks approach remains favoured On Friday, The sterling correction from the previous two days continued, albeit at a moderate pace. From the start of European trading, the UK currency ceded ground against the euro and the dollar. We see it in the first place as follow-through price action on Thursday's move. There was little hard new from the UK side of the story. Cable dropped from the 1.5340 area to the 1.5240 area and then settled in a sideways consolidation pattern. The combination of sterling weakness and a decent bid for the euro also pushed EUR/GBP higher in the 0.71 big figure. EUR/GBP closed the session at 0.7186 (from 0.7148). Cable ended week at 1.5291, from 1.5316. Later today, the UK manufacturing PMPI is expected to rebound 51.9 to 52.7. A more pronounced rebound after last month's setback is possible. There are no important UK data. So, sterling traders will have to look for guidance to price moves in the dollar/euro. So, the day-to-day momentum for sterling might be rather constructive, especially against the euro. Recently, sterling remained in good shape even as expectations for a BoE rate hike are pushed back to 2016. Even as the sterling momentum was constructive, we had the impression that enough good news was discounted. Thursday's price action indeed suggested that enough good news was discounted for sterling and that the UK currency is ripe for consolidation/profit taking. The EUR/GBP 0.7014 cycle low looks a tough support for now. We look to sell EUR/GBP, but wait for a more pronounced up-tick.

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