Dollar Stumbles Further Ahead of Greece Vote, S&P 500 Resistance Euro Traders Now Turn to Greece’s Austerity Vote – Resolution or Temporary Relief? British Pound Slumps as BoE’s Posen Leverages His Dovish Tone, Trade Disappoints Canadian Dollar Readies for Inflation Data, Interest Rate Speculation Australian Dollar Rebounds as Market Rates Ease from Biggest Drop in 8 Months US Oil Stabilizes at Long-Term Trend as Market Wonders if Reserve Dump Priced In Gold: Positive Vote or Not, Uncertainty in Europe, Asia and US Finances Prominent Dollar Stumbles Further Ahead of Greece Vote, S&P 500 Resistance There was little to support the US dollar Tuesday; but the maintenance of a high volatility regime would require price action from the benchmark currency. It just so happened, that active market conditions were staged against the backdrop of a build in risk appetite and positive outcome for the upcoming European event risk. These particular catalysts tap into the deeper fundamental concerns behind the dollar – its role as a safe haven and its unprecedented value as the world’s reserve currency. Between these two particular concerns, EURUSD would be one of the top benefactors for the session with a second consecutive advance; but the carry sensitive AUDUSD and NZDUSD pairs would find substantial strength out of the sentiment shift on their own. For the dollar’s overall performance, the Dow Jones FXCM Dollar Index (ticker = USDollar) would chalk up its first back-to-back decline in two weeks. That said, at 9,671 the Index has not yet been knocked off its June bull trend. To establish the greenback’s bearing going forward, we need to first look at the prevailing risk appetite winds. We have indeed seen a notable rebound from the S&P 500 and similar benchmarks in Europe and Asia. Yet, this recent upswing has not substantiated a true bull trend. The US Index itself is facing still capped by this month’s well-tested zone of resistance between 1,300 and 1,295; while other benchmarks for risk (equity baskets, speculative commodities, yields) are still generally anchored to congestion. The recent swell in optimism and the consistency in this risk appetite across the market increases the potential for a further break of near-term resistance (bearish break for the dollar); but follow through will be quickly called into question. Feeding investor confidence in today’s markets is exceptionally difficult given the global slowdown in economic activity, the worldwide drop in the expectations for returns and the prevalence of financial risks (Greece, China, even the US). Therefore, rather than position for long-term bull trends, we should be cautious of short-term relief rallies that fade quickly as reality sinks back in. The short-term swings in risk appetite trends and the indirect impact of the Greece budget vote (more on that below) should be our immediate concern for dollar direction and volatility. However, for the lasting trends; we should make reference to USDJPY’s performance through Tuesday’s close. While it would be easy to simply assign this pair’s advance to an anti-carry move weighing on the Japanese currency more than its alternative; the more appropriate account refers to the aggressive rally in the two-year US Treasury note yields. This benchmark for returns has surged more than 50 percent in the past two days (currently at 0.4732 percent). While this may have more to do with the disappointing five-year auction; it nonetheless shows the sensitive of rates at these low levels and the impact a shift in rate expectations can have with the end of the QE2 buildup this week. As for Tuesday’s sentiment index and the upcoming pending home sales, don’t expect much.

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