Asia just crawled through a slow Tuesday session that was hampered by low liquidity due to the US being out for the Independence Day holiday. With thinned markets exaggerating moves, risk took early flight on a news report that implied that the perceived Chinese housing bubble was close to bursting, an event that could be a further detriment to struggling global banks. EUR/USD dipped to 1.2480, a key support level for the pair, but was able to rebound to eventual session highs near 1.2560 as the risk aversion evaporated.

Yen crosses all saw similar early lows, EUR/JPY to 109.15, GBP/JPY to 131.85, and AUD/JPY to 72.70, that were soon forgotten with fresh session highs to110.35, 133.30, and 74.10 respectively. USD/JPY slipped from its 87.75 comfort level to tap an 87.40 low followed by a high near 87.80.

Data releases today were clearly and singularly focused on the Australian dollar. Trade balance was first up with a very solid result of +1.65B, more than tripling the forecast of +0.53B due to strong exports of raw goods to China. This helped hasten the AUD/USDs ascent from its risk adverse session lows near 0.8320. The pair was near 0.8370 as the data event of the day, the RBA rate decision was doled out as unchanged at 4.50%, a move that surprised no one. The pair eventually made its way to highs just over 0.8440, roughly near the middle of June’s trading range between 0.8100 and 0.8800.

With traders caught in a game of trying to weigh which current economic event is potentially worse, the potential double dip recession in the US, or the continued bank malaise in Europe, trading should remain choppy and news driven. Some clues should emerge in the coming days with US ISM data due up later in New York to begin the shortened week there, and Wednesday will bring a release from the Committee of European Banking Supervisors which is overseeing the current European stress tests. This committee will publish details of which European banks are being tested and the criteria being used to test those said banks. Both these events will be instrumental in helping to determine market direction.