The US dollar is narrowly mixed as over-extended technicals, and the lack of fresh developments, keep the bulls at bay. The nearly 2% drop in gold price to new five-year lows is a talking point today. The relaxation of tensions both in Greece and China reduce the haven interest. At the same time, the prospect of higher US and UK rates increase the opportunity cost of holding a non-income bearing asset.
It is a big day for Greece, but without the drama that has characterized the past few weeks. The EFSF bridge loan has been made, and in essence the Greek government turns the check over, endorses it, and gives it back to the IMF and ECB. Greek banks have re-opened after the three-week holiday. Capital controls remain in place (with 420 euro weekly cap in lieu of more rigid 60 euros a day) and the stock market remains closed. Unless negotiations proceed quickly for a third assistance program, another bridge loan may be needed for next month's debt servicing.
The news stream is light. Japan's markets were closed for Ocean Day. The highlight from the European session was the May current account surplus of 18 bln euro s on a seasonally adjusted basis, which is the smallest since last November. It is not a market mover. Recall that that combination of the compression of domestic demand throughout the euro area, which is drag on imports, and deflationary forces and euro weakness, which boosts exports, flatter the external accounts. On top of this, is the German export machine. It is a light day/week for the North American economic calendar as well.
The euro's bounce ran out of steam just above $1.0860. A new low, below $1.0820. This area corresponds to the low from late-May and could be the neckline of a double top pattern (May and June highs (~$1.1465 and $1.1435). If this is a valid pattern, the projection on violation is near $1.02. Sterling is trading at four-day lows and short-term UK rates are a touch softer. The $1.5540 area has not been convincingly broken, but if/when it is, the potential exists toward $1.55 and possibly $1.5470 before buyers return ahead of the MPC minutes in the middle of the week (and retail sales on Thursday).
