Dollar on defense on hopes for Greek resolution

The euro is the top performer in late afternoon trade in New York with a 0.51% advance against a weaker greenback. As markets continue to eye developments out of Europe, the single currency continues to push higher after rumors circulated that Greek Prime Minister Papandreou may cancel calls for a referendum on EU membership as well as the terms for the newly proposed rescue package. Although the situation in Greece remains on shaky ground, markets have continued to advance as the government is now expected to move swiftly with vote of confidence expected tomorrow. The EUR/USD pair continues to hold just below the 1.3820 interim resistance level with a likely break here eyeing topside targets at trendline resistance, 1.3867 and the 23.6% Fibonacci extension taken from the August 29th and October 27th crests at 1.39613. Interim support rests at 1.3750 with subsequent floors seen at the 38.2% extension at 1.3708 and 1.3655. The euro will remain extremely vulnerable to developments out of the region with investors eyeing euro zone PMI, PPI, and German factory orders overnight.

Key Levels/Indicators

The Japanese yen is the weakest performer against the dollar with a gain of just 0.10% late in the session. The USD/JPY pair has continued to hold an extremely tight range after the fallout from the Sunday night intervention saw the pair surge nearly 400pips. Yen advances are likely to be limited as traders remain reluctant to test the resolve of Japanese officials by lifting the currency too quickly. The pair continues to hold just above the 38.2% Fibonacci retracement taken from intervention advance at the 78-figure with subsequent support targets seen at 77.75 and the 50% retracement at 77.50. Topside resistance holds at the 23.6% retracement at 78.55 followed by the 79-handle and Sunday’s high of 79.50.

Key Levels/Indicators

Michael Boutros, Currency Analyst for DailyFX.com is a Technical/Fundamental Analyst specializing in the FX markets. E-mail: mboutros@fxcm.com.

Twitter: @MBForex
WEB: www.DailyFX.com