The USD is back on the offensive this morning after disappointing economic news from the Europeans plus comments from the US RE: a Freddie/Fanny bailout encouraged traders to buy USD overnight. UK Producer Inflation hit double-digits in May and the GBP fell as speculation rose that the economy would slow more in coming months; traders note that more weight given to USD strength and EURO data than domestic news overnight.

Traders bought USD across the board overnight once it was confirmed that the US intends to aid both Freddie Mac and Fanny Mae to prevent further declines in housing and economic slowdown. In my view, the aid is probably going to help but the overall volumes and upside seen in the USD looks more like a “knee jerk” reaction than a change in sentiment.

Although EURO scored solid highs late last week and attempted to add to those gains today the rate fell on an unexpected drop in EMU Industrial Production; falling 1.9% last month. EURO dropped to a low print at 1.5840 after Russian and Swiss names were seen selling along with hedge funds. GBP dropped in sympathy with EURO for a low print after all the news at 1.9714 before recovering back near the closing range for Friday.

USD/JPY and USD/CHF both rallied as the USD gained strength during the Asian session for highs in late Europe; USD/JPY found light stops for a high print at 106.82 while USD/CHF found stops as well but only managed a high at 1.0253. Both pairs have more stops above the market traders say but offers are expected to cap ahead of last week’s highs. In my view, the USD has traded more two-way and within range following through from last week and is not set to break out of those ranges early this week.

Likely that it will take news due tomorrow and later to push trader’s perception that a correction in the USD is under way. Look for more technical trade the next 24 hours as traders adjust positions for smaller gains and whipsaw.

Overnight Asia/Europe

•USD two-way
•UK and Eurozone news push those lower
•Technical trade likely to continue

Today’s Economic Reports
All times EASTERN (-5 GMT)

No reports due on Monday
No real news until PPI on Tuesday.

Looking Ahead to Tuesday
All times EASTERN (-5 GMT)

•8:30am USD Core Retail Sales m/m
•8:30am USD PPI m/m
•8:30am USD Retail Sales m/m
•8:30am USD Core PPI m/m
•8:30am USD Empire State Manufacturing Index
•10:00am USD Fed Chairman Bernanke Testifies
•10:00am USD Business Inventories m/m
•10:00am USD IBD/TIPP Economic Optimism

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