The USD whipsawed traders again today initially coming on the board higher from light overnight trade but then falling off hard to make lows on the day in some pairs. Equities prices fell back after a strong early start underscoring the overall weakness of the US economic situation many feel; the USD is under threat this week as more Equities losses are likely and the G8 will likely not offer any real help to the Greenback near-term.

Traders note that the G8 summit will be long on rhetoric and short on action with the most likely agreement to be some kind of announcement that the US will open the SPR soon to reduce the price of oil. Should that be the case expect a wild ride for the major pairs as the euphoric rally in stocks, USD, and bonds will likely see a major correction in the major pairs. That not-withstanding, no mention of any help for the USD will likely further accelerate losses into the end of the week.

On the day, the GBP started weaker for a low print at 1.9647 but once stocks fell off the GBP rallied along with EURO and reversed a full handle to trade in the 1.9760/70 area after the London fix. EURO also reversed hard after making a low print at 1.5610 the rate rallied to the 1.5724 area after posted a new daily high at 1.5755; stops in both EURO and GBP were noted on the way higher as late shorts got crushed. In my view, day traders had the best clue for a EURO long this morning on the announcement that model accounts were on the offer at 1.5640 area; those guys are almost always a sure bet for a reversal.

USD/JPY topped at 107.75 this morning on thin volumes before turning lower; traders note stops at the 107.20 area and 107.00 area helped push the rate to a new daily low at 106.65 before a slight bounce was seen. Closing back over the 107.00 area a pause for the bears and if you have shorts working expect the rate to rally back to the highs before turning lower again. Lots of whipsaw likely the next few trading sessions as USD traders try to make sense of the conflicting rhetoric and fundamentals.

Tomorrow’s data likely to be a non-event but expect some volatility around the release of homes sales data. Overnight expect a quiet two-way session with the USD likely to be slightly better in the morning on follow-on volatility.

Today’s US Dollar Trading

•G8 Summit begins
•USD gives back early gains
•Technical trade dominates

Overnight Preview

•Expect two-way action with the USD to cover a lot of the same ground again

Looking Ahead to Tuesday

All times EASTERN (-5 GMT)

•8:00am USD Fed Chairman Bernanke Speaks
•10:00am USD Pending Home Sales
•10:00am USD Wholesale Inventories

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