Sunrise Market Commentary: Developments in Greece once again dominate the headlines today. The Greek parliament will deliberate over the proposed medium-term fiscal plan culminating in a crucial vote scheduled for mid-week. The measures would involve both

• Global core bonds correct lower, as risk appetite increases
  After a risk aversion session ahead of the weekend, some risk appetite returned. French proposals for a bond roll over got a positive reception, while rumours of a plan B in case the Greek parliament would reject the MTFS helped too. Today, it may be a wait-and-see session ahead of tomorrow’s crucial Greek vote.
• Euro rebounds even as uncerainty on Greece remains high
  Yesterday investors turned more positive on risk after last week’s sell-off as they grew more confident that a Greek debt chaos might be avoided. EUR/USD recouped Friday’s losses. However, as there was no hard news to support yesterday’s optimism, the euro remains vulnerable going into tomorrow’s Greek vote. EUR/GBP is close to key resistance.

The Sunrise Headlines

• US Equities ended a three-day losing streak on Monday as technology and financial stocks jumped higher. This morning, Asian shares lost most of their opening gains and trade mixed.
• According to sources, European officials have started debating contingency plans in case the Greek parliament fails to approve a €28 billion austerity package, which will be voted after a three-day debate that started yesterday.
• European financial institutions have sketched out a plan to extend a substantial portion of Greece's maturing sovereign debt for up to 30 years, as creditors coalesced around a French-led replica of the Brady bonds used to bail out Latin America 22 years ago.
• US President Barack Obama is confident Democrats and Republicans can cut a 'significant deal' to trim the US deficit and increase its borrowing limit to avoid a damaging default, the White House said.
• China had given 'quite full support' to French Finance Minister Lagarde in her bid to become the next managing director of the IMF, China's central banker said yesterday, giving her a key boost as the IMF board moves towards selecting her this week.
• Japanese retail sales rose for a second straight month in May compared with the previous month, signaling that consumers are more willing to spend as sentiment gradually recovers from the earthquake.
• Today, the eco calendar contains the German CPI inflation data, US consumer confidence, the Richmond Fed index, S&P CS house prices and the final figure of UK Q1 GDP. BoE members will speak before parliament.

Currencies: Euro Rebounds Even As Uncerainty On Greece Remains HighEUR/USD

On Monday, the storm that unsettled markets at the end of last week calmed down. There were no data with market moving potential. The focus of investors remained on the Greek debt crisis, although there was not really any hard news and the outcome of the vote in the Greek Parliament is still highly uncertain. However, investors saw enough signs that some kind of solution might be reached in one way or another. Sentiment on risk turned less negative and EUR/USD reversed Friday's losses.

EUR/USD was still under pressure in Asia as negative headlines on the financial sector in Europe continued to swirl. However, the tensions eased at the start of the European trading session. There were no important economic data in Europe. But there was a lot of market talk on a French plan/agreement providing details on how European banks would roll-over Greek debt. The plan also received positive comments from German policy makers, indicating that at least this part of the Greek debt crisis would be manageable. EUR/USD moved gradually higher off from the overnight lows. The US spending and income data were somewhat weaker than expected, but had no lasting impact on currency trading. The US equity markets took a fairly good start of the new trading week. Markets apparently saw a decent chance that the Greek austerity plan will be approved later this week even as this assessment remains subject to a high degree of uncertainty. Nevertheless, the rebound of US equities also supported EUR/USD. Throughout the US trading session there were also rumours that European authorities were working on a plan B to prevent a spreading of the Greek debt crisis in case the austerity measures would not pass parliamentary approval in Greece. There were no details on this plan, but it was enough a reason for the relief rally to continue. EUR/USD returned to the high 1.42 area and closed the session at 1.4287 compared to 1.4188 on Friday evening.

Today, the calendar of eco data is thin in Europe. Investors will keep an eye on the preliminary German CPI's for June. However, we don't expect this report to be a key factor from currency trading. In the US, the CS house prices, consumer confidence and the Richmond Fed manufacturing are on the agenda. From a currency point of view, the question is whether the data will be ‘good enough' for US equities to extend yesterday's rebound. If so, this might be slightly supportive for the single currency, too. During the day, there will also be headlines on the screens from the visit of Chinese Prime Minster Wen Jiabao to Germany. There might be some comments on the global role of the yuan and the euro. Markets will also look out for comments of Chinese policymakers on their commitment to buy European debt. If so, this might be slightly supportive for the euro. Of course, markets will continue to look out for the vote on the Greek austerity package. The issue remains a key event risk for all markets, including EUR/USD trading. The market will probably again be haunted by all kinds of rumours which can go both ways. So, volatility will probably remain high. Yesterday, markets considered the glass half full supported by some small news headlines. A few negative headlines/comments are perfectly able for (currency) markets to see the glass half empty today. So, we think that not much has changed. Uncertainty and volatile trading will probably remain the name of the game.

We had a LT bullish strategy for the EUR/USD cross rate based on the different policy approach between the ECB and the Fed. After a long rally since early this year, a forceful correction started early May, as the ECB fell short of signalling a rate hike in June as markets expected. Renewed uncertainty on Greece and the commodity correction reinforced the repositioning in EUR/USD. Since mid May, the pair gradually bottomed out, but the flaring up of the Greek debt crisis capped the rebound. The political debate on Greece will probably keep LT euro buyers at bay until there is hard evidence on a solution. This evidence should come later this week. The EUR/USD price action of late looks confirming our basic view, that the downside in this cross rate remains reasonably well protected as long as outright chaos on the Greek debt crisis can be avoided. This doesn't exclude some violent swings if uncertainty on this issue persists. 1.3968 is the key milestone on the technical charts. For now, we retain the working hypotheses that a sustained brake beyond this level will be difficult. A break below this level would be a high profile warning signal. It could even be an indication of some kind of euro panic. For now, we don't preposition for such a break

EUR/USD: volatile trading going into the Greek austerity vote

Support comes in at 1.4255 (Reaction low hourly), at 1.4206 (Break-up hourly), at 1.4176 (Daily envelope), at 1.4102 (Week low), at 1.4094 (Daily Boll bottom) and at 1.4073 (June 16 low).

Resistance stands at 1.4330/41 (Reaction high/Breakdown daily +daily envelope), at 1.4363/75 (Breakdown hourly + Weekly envelope/Weekly MTMA), at 1.4403 (50 d MA), at 1.4242 (22 June high) and at 1.4519 (Daily channel top).

The pair is in neutral conditions

USDJPY

On Monday, there was again no big story to tell on the USD/JPY price action. After a spike higher early in Asia, the pair settled in a very tight sideways range in the upper half of the 80 big figure. The pair enjoyed some support as sentiment on risk improved during the US trading hours. However, there were no big follow-through gains. Sentiment was constructive, but no key technical levels were broken. The pair closed the session at 80.89, compared to 80.43 on Friday evening.

This morning, Asian equity markets don't join the rebound on US markets yesterday evening. This casts doubts on the performance of European equity markets. In this context, its is also doubtful that core bond yields will continue to rise, which an important factor for USD/JPY to succeed further gains. USD/JPY is a few ticks lower compared to the close yesterday evening. The US data, via US bond yields, might cause some intraday volatility but the global picture in this cross rate remains highly indecisive.

In April and early May, USD/JPY declined almost uninterruptedly from the correction high at 85.53, reversing an earlier yen weakening. It also mirrored underlying global dollar weakness. The story on USD/JPY remains ambiguous. Since late May, overall dollar weakness pushed USD/JPY again to the bottom of the 79.57/82.23 trading range. From there a cautious rebound started that was recently reversed again, keeping USD/JPY near the 80 bottom range. We maintain a cautious, technically inspired, positive bias for this cross rate. Nevertheless, stop-loss protection below the 80.00/79.57 range bottom remains warranted

USD/JPY: basically going nowhere

Support comes in at 80.58 (STMA), at 80.36/29 (Reaction lows), at 80.01/79.93 (Reaction low/Reaction lows hourly), at 79.69/57 (08 June low + Boll bottom/ May 5 low) and at 79.00 (Weekly Boll Bottom).

Resistance is seen at 80.98 (Reaction high), at 81.08/14 (Breakdown hourly +daily envelope),at 81.29 (Weekly MTMA) and at 81.77 (31 May high).

The pair is in neutral territory

EURGBP

On Monday, the price action in the EUR/GBP cross rate was driven by global factors. The pair for an important part tracked the price dynamics in the headline EUR/USD cross rate. The pair gradually rebounded from lows at the end of last week and early in Asian trade. The rebound accelerated during the US trading hours. Even as this move was in the first place inspired by investor hope that a Geek debt crisis will be avoided, yesterday's price action also suggests ongoing underlying sterling weakness. After the close of the European markets, some headlines of a speech from BoE's Posen flashed on the screens. He rejected calls from the BIS that central banks should raise rates. Of course, is view is well known by markets. So, the headlines had no big impact on currency trading. EUR/GBP closed the session at 0.8935, compared to 0.8890.

Today, Final revision of the UK Q1 GDP will be published. This should be old news for markets. Markets will keep an eye at the appearance of BoE policy makers (including Governor King) before the UK parliament's Treasury Select Committee. After the publication of the minutes of the previous BoE meeting, any soft speak from BoE policy makers shouldn't come as a surprise anymore. Of course it also won't be a support for sterling. The headlines on Greece remain a wild card for the euro overall.

We have a LT EUR/GBP bullish view. The ECB's firmness to prevent inflation from filtering through into the economy contrasts with the BoE MPC's attitude of postponing a rate hike despite ongoing sky-high inflation readings. The EUR-GBP interest rate differential increased accordingly and pushed the pair beyond the 0.90 mark early May. After the May ECB press conference, a forceful correction kicked in and the pair extensively tested the 0.8715/0.8654 support area (previous lows). At that point, we reinstalled a buy-on-dips approach in line with our LT sterling negative bias. Of late, the downside in this cross rate remained well protected, even as the Greek debt crisis came back in the spot lights. The BoE minutes of the June meeting suggested that the BoE is closer to additional QE rather than to a tightening of monetary policy. This prevents any sustained rebound of the UK currency. A buyon- dips approach remains favoured for the EUR/GBP cross rate. However, after the recent gains and with the Greek debt crisis moving into a key phase, some consolidation/ correction might be in store short-term. 0.9043 is the next high profile target on the technical charts. A break beyond this level would be an indication of a further deterioration in sentiment on sterling.

EUR/GBP: coming close to key resistance

Support comes in at 0.8920 (STMA), at 0.8907/92 (Break-up hourly/daily envelope), at 0.8862/60 (Boll Midline/reaction low), at 0.8843 (Break-up daily), at 0.8804 (LTMA) and at 0.8791 (reaction low).

Resistance is seen at 0.8956/76 (Reaction high/Reaction high +Boll Top +daily envelope), at 0.8987 (Weekly envelope), at 0.9014 (Daily Boll top) and at 0.9043 (Year high).

The pair is moving into overbought territory.

NewsUS: personal spending unexpecedly stabilizes in May

In May, US personal income rose by 0.3%, slightly less than expected as the consensus was looking for an increase by 0.4%. Even more disappointing was the stabilization in personal spending, while a slight increase was expected and also the previous figure was downwardly revised. For the first time in almost one year personal spending didn't increase. Personal consumption expenditures for durable goods fell by 1.5% driven by a sharp decline in new motor vehicle sales. PCE for non-durables fell by 0.3% due to weakness in food store purchases. The Core PCE deflator was up by 1.2% Y/Y, more than expected, but still significantly below 2.0% Y/Y. The savings rate picked up again, rising from 4.9% to 5.0%. The figures indicate that consumer spending weakened in May due to higher prices while consumer also increased savings. Q2 PCE will be weak suggesting that also Q2 GDP will be weak again.