Dollar higher as Greece deal looms

The dollar has gained ground as Greece’s fate hangs in the balance, and two Bank of England updates this week hang over the pound. 

Euro and US dollar notes
Source: Bloomberg

Euro eyes Greece

Greece is still in focus and today’s summit may bring about the unlocking of finances that the Athens administration desperately need to avoid defaulting.

Yesterday, the Greek prime minister Alexis Tsipras put forward new proposals and even though nothing has been agreed upon the market has high hopes for a deal. Mr Tsipras stated the proposal was ‘mutually beneficial’ and more importantly Martin Selmayr of the European Commission described the reforms as a ‘good basis for progress’.

The market has seen this Greek debt saga rumble on for five years and we have always seen a deal reached in the end, preventing Greece from going bankrupt; dealers are expecting history to be repeated.

EUR/USD has been in an upward trend since March, and the initial target is $1.14. A move through that mark will put the May high of $1.1467 will in focus; however, any pullback should find support at $1.13, and if that level is punctured traders will look to $1.12 for support.

Pound falls below $1.59

Sterling has slipped below $1.59 as broad upward moves in the greenback have reversed some of the pound's gains.

GBP/USD has been in an upward trend since April and the seven-month high reached last week remains fresh in traders’ minds. Outside of the US existing home sales report at 3pm (London time), the economic calendar for both countries is quiet today, and volatility is anticipated to be low.

On Wednesday, the US will reveal the final reading of the first-quarter GDP, and the market is expecting a revision from -0.7% to -0.3%. We will see a decline in GBP/USD should estimates be exceeded.

The $1.58 level is acting as support and if the level is upheld the resistance at $1.59 will be the first target, then $1.5930 will be brought into play. A drop below $1.58 will make $1.56 the next level of support to watch out for. 

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