The dollar slumped across the board in Tuesday trading amid a return to riskier assets, with the greenback sliding to 1.3839 against the euro and just shy of the 0.88-figure versus the Aussie. The US stock indexes climbed higher as the Dow Jones improved by over 1.75% to back above the 10,000-level while the S&P 500 edged up by more than 1.4%. Traders also pushed crude oil sharply higher, advancing by more than 2.7% to 73.86 per barrel while spot gold increased by nearly 1.3% to $1,076.

Fears over Greece's burgeoning deficit were tempered as ECB President Trichet left Sydney earlier than expected to attend the EU summit later this week. Deficit worries in Europe have weighed heavily on markets in recent weeks, exacerbating heightened risk aversion from fears over policy tightening from China.

The economic calendar consists of trade balance figures from Canada and the US. The December US trade deficit is estimated to improve to $35.8 billion from $36.4 billion in November. Meanwhile, Canada's December trade deficit is estimated to improve to C$100 million from C$300 million in the previous month. Markets will also focus closely on Fed Chairman Bernanke's testimony before the House Finance Committee. He is expected to outline the Fed's exit strategy and any hints for a rate hike will be closely scrutinized.

Euro Edges Higher

Germany's CPI data was largely within expectations. The January final reading for CPI was unchanged at -0.6% m/m and 0.8% y/y. The current account surplus increased by more than expected to 20.6 billion euros from a downwardly revised 17.8 billion previously.

EURUSD trades around 1.3790 with resistance eyed at 1.3820, followed by 1.3850 and 1.39. Subsequent ceilings are seen at 1.3940, followed by 1.3970 and 1.40. On the downside, support starts at 1.3760, backed by 1.3730 and 1.37. Additional floors will emerge at 1.3660, backed by 1.3640 and 1.36.