The USD is slightly better today as traders continue to digest the effects and solutions to the recent financial crisis affecting global trade. Debate is raging on Capitol Hill regarding exactly how to implement the fiscal bailout plan proposed by the US treasury and the Federal Reserve.

Sentiment is leaning more toward an emergency plan sooner-rather-than-later and if the US congress fails to act decisively and confidently by the end of the week it is likely that investor confidence in a solution will begin to wane. In response the Greenback opened better overnight and built on small gains into US trade and then as equities failed to hold gains began to slide off. Traders note that stops in most pairs were triggered during US action suggesting that many had set new USD shorts overnight or early today when the USD failed to hold gains but were whipsawed on minor price action.

GBP railed for a high print overnight at 1.8636 before dropping back and made lows on the day in New York at 1.8470 before attempting a recovery back to the middle of the range. Traders note volumes were modest but enough to cause some intraday volatility.

EURO followed cable lower during the day for a low print at 1.4621 before returning to the 1.4700 handle later; traders note that in both pairs a "buy the dip" mentality is currently in play but no one is certain how far a correction from recent strength may go. End result is that traders are nervous and unwilling to hold positions for too long leaving the markets vulnerable to intraday whipsaw.

USD/JPY rallied for a new high in New York at 106.09 before dropping back to the low 105.00 handle; traders note technical resistance at the 106.00/20 area appears firm on the first try at a bounce.

Other pairs are suffering the same fate as the USD/JPY; Swissy is off the rally highs at 108.15 with a high print at 1.0891. Traders note that the USD/CHF pair has made a perfect retracement to the breakdown point of 1.0880 before sliding off suggesting that the rate will likely suffer a move back to the lows around the 1.0700 handle.

USD/CAD is falling back from its highs as well and looks almost certain to break the 1.0500 handle near-term; traders note that a lot of offers were absorbed in that pair suggesting that there is a lot of technical buying of support in Loonie. In my view, the USD is likely to continue two-way and cover a lot of the same ground twice but with a lower bias. Best action is to sell rallies in my view.

Today's US Dollar Trading

•           USD rallies in US trade after starting weaker in Asia
•           Two way technical trade the rule today
•           Traders note volumes were moderate

Overnight Preview

•           Look for more consolidation
•           Two-way action likely

Looking Ahead to Wednesday
All times EASTERN (-4 GMT)

•           10:00am USD Existing Home Sales
•           10:00am USD Fed Chairman Bernanke Testifies
•           10:35am USD Crude Oil Inventories
•           2:30pm USD Fed Chairman Bernanke Testifies

Forex Analysis by Jason Alan Jankovsky at ForexPros.com. For more details about Forex Trading and Tips for decent earnings through Forex Trading, Please check http://www.forexpros.com