v USD gains on safe-haven flows despite weak Philly Fed data. v EUR held flat but markets are anticipating a further drop due to contagion fears. v CAD falls as slowing US economy dims outlook.

Since the dovish BoE inflation report and Mervyn King press conference, the sterling has been weak, and the GBP/USD has been sliding sharply. After a brief pause at 1.59, the market fell sharply to 1.58 and is now testing an area of support cluster from 1.5770 to the 1.58 handle. Looking at the daily chart below, the 1.5770 level is 50% retracement of the 2012 rally from 1.5237 to 1.6305.

USD/JPY failed to break above the May high and essentially range resistance at about 80.55. So no returning to 50% retracement at 81.78 for now, especially now that it has falling below 80.00 and even a trendline seen int he 4H chart during the 5/17 US trading session.

The EUR/GBP is not heading to the 0.77 level just yet. Holding above 0.7950, the market is now pushing above 0.80, and looking at the 0.8048 short-term resistance pivot. It should be noted that the 4H RSI reading is testing 60. It has been able to mostly stay below 60, reflecting a persistent downtrend since the beginning of March.

The EUR/USD broke into new lows for the week, coming down to the 1.2660 level at the beginning of the 5/17 US trading session. The 1.2625-1.2660 support area has been documented at FXTimes on the daily chart.

The Euro slipped to a fresh monthly low of 1.2660 as the heightening risk of a Greek exit dragged on investor confidence, and the single currency may face additional headwinds over the remainder of the week as the threat for contagion continues to sap risk-taking behavior. Indeed, Spain missed its EUR 2.5B target as it sold EUR 2.49B in bonds, with the 2015 notes yielding 4.876% versus the 4.

With the pair selling off and breaking below its medium term rising trendline, further bearishness is expected in the days ahead. On continued weakness, GBP will target the 1.5805 level, April 05'2012 low with a violation of there allowing for more weakness towards the 1.5642/53 levels, its Feb 14/15'2012 lows.

With continued downside weakness seen, the cross looks to hold on to its broken support and weaken further. In such a case, its key support standing at the 126.53 level will be targeted on further declines with a cut through here aiming at the 125.45 level followed by the 124.50 level and then the 122.02 level, its Jan 25'2012 high.

World Bank President Robert Zoellick said Wednesday if Greece leaves the EuroZone, it may have "ripple effects" comparable to the collapse of Lehman Brothers in Y 2008. The debt-ridden European country faces political economy questions, not simply economic issue, Mr. Zoellick said in a forum sponsored by the Economic Club of Washington, DC.

With uncertainty in Europe spooking investors away from any asset perceived as risky, many Americans have become wary of overseas equities. While the fear is understandable, it may be keeping us away from some of the world's most promising economies.