Price Action Indicates Dollar Advance is not Over

The relatively shallow pullback in the dollar was greeted with renewed buying and this would suggest the dollar's recovery is not over. At the moment the foreign exchange market does not appear to be driven by economic data. The Greek crisis is not simply about Greece but uncovers a fissure at the very heart of EMU. Is monetary union really sustainable without political union, without which there is no mechanism to coordinate and enforce fiscal rules. In addition to the fundamental story, whose saliency has increased in the fx and debt markets, there is a technical component as well--with model driven accounts and trend followers jumping aboard the dollar express.

The highs the currencies recorded in the NY morning will be important mile markers going forward. These are roughly $1.4110 in the euro and $1.6235 in sterling. The yen is a different kettle of fish and appears to be benefitting from the risk-off trade. The JPY91.80JPY92.00 is key resistance for the dollar as is JPY129.50 on the euro-yen cross. On the downside the $1.40 level beckons the euro and a break could open the door to $1.38. Sterling support is seen near $1.6120-30 but a break could signal a move toward $1.58. Modest dollar support is seen near JPY91.00.