After taking a beating last week, the USD is beginning to show some small signs of recovery. Starting the week… … clouded by uncertainty and straining under market anxiety, the USD sustained blow after blow from the impact of deliberations about a U.S. economic rescue plan, and worse-than-forecasted economic indicators.

The verdict is almost out as news from Washington is indicating that a breakthrough was
made over the weekend and the bailout package is almost set to be passed into law,
giving the U.S. Treasury more authority over the financial workings of domestic
banks and financial institutions and, in theory, stabilizing the recent financial
crisis.

Generating less volatility than expected, the market last week was characterized
more by lack of direction than anything else, as analysts struggled to predict the
movement of the major currencies. The $700 billion rescue plan, the largest
financial bailout since the Great Depression, if enacted, could put an end to this
currency flotation and send traders en masse back to regular trading. Fed Chairman
Bernanke and Treasury Secretary Paulson are both pushing Congress to pass this
legislation as quickly as possible. But is this bailout package a blessing or a
curse? With the potential to correct the economic woes of today's market, it also
pushes the U.S. financial system closer to socialism and farther away from the
capitalist economy which gave it its most powerful boost following the Great
Depression and World War II. Analysts are divided about the short- and long-term
costs and benefits of this package, but only time will tell which side was right.

Looking at the expectations for today, traders can anticipate less volatility with
the USD as few major indicators are set to be released and the bailout package is
still being discussed. Unless a major decision is passed regarding the bailout, the
USD is expected to remain rather stable versus its currency counterparts. Looking at
the rest of the week, traders may look for larger amounts of volatility come
Wednesday as ADP Non-Farm Payrolls are expected, followed by the actual Non-Farm
Payrolls figure to be released Friday. These indicators typically generate high
trading volume, as well as market volatility, as traders anticipate their impact on
the market. Traders should start the week looking to set up beneficial positions for
what could be a big week in the Forex market.

* EUR
German Economy Implicates Recession for Euro-Zone
Last week, the EUR went through some choppy waters while showing mixed results
against the Majors. The 15-nation currency lost value versus the USD closing at
1.4665 on Friday, but gaining significant ground against the GBP just before closing
out Friday's trading session. The EUR did experience some volatility against the
JPY, due to a strong news week by the Asian powerhouse. The EUR bullishness against
the USD was mostly motivated by U.S. developments, as investors around the world are
closely following what moves will be enacted by the U.S. leadership in order to
improve the economy's condition.

The economic indicators from the European economy, released last week, continue to
confirm what the European Central Bank fears most: a Euro-Zone recession. The German
Ifo Business Climate extended its 7-month decline as it was published at 92.9,
failing to reach expectations of a 94.2 reading. As Germany possesses one of the
most influential European economies, its indicators have a strong impact on the
entire Euro-Zone. While the EUR continues receiving negative signals, it appears as
though it will continue floating with no significant price breach so long as the
other major economies especially that of the United States, release no significant
data.

Looking ahead this week, we have important events to anticipate from the Euro-Zone
such as German Unemployment Change, the CPI Flash Estimate, and others. European
Central Bank president Jean-Claude Trichet is set to speak twice this week. The
first will be after accepting the European Banker of the Year award, and the second
will be in a debate on the role of wage politics for growth and competitiveness at
the European Trade Union Conference. Traders should expect high volatility in the
market at these times as investors try to ascertain the future movement of interest
rates. Today, the market will be driven more by global news events than anything
else as few economic indicators are set to be released.

* JPY
Japan's Economy Afflicted by Negative Expectations
Last week was a wild week for the JPY as it experienced a hefty amount of
volatility. The Asian currency experienced bearish trends versus all of the major
currencies during most of last week's trading sessions, until late in the week when
it began to make some reversals. The Japanese currency gained over 100 pips against
the USD when it closed trading at 106.13 last Friday, after losing value steadily
throughout the week. The weakened U.S. economy has been one of the major culprits in
Japan's economic downturn, as well as the price jump in Crude Oil, which has
generated an adverse impact on the JPY. An example of this was delivered when the
Japanese exports to the U.S. fell by 19.1% in August, marking its lowest figures
since January 2006, all of which pushed investors to lose confidence that the
Japanese economy would be less affected by recent events.

This week should be a somewhat active week for the JPY as well seeing as a batch of
indicators are expected to shed light on the Japanese economy as a whole. The JPY is
off to a good start this week as yesterday's Retail Sales figure came out better
than expected. If this week's indicators continue to produce positive results, the
JPY could see a strengthening week. An important event will be Tuesday's Tankan
Manufacturing Index and Non-Manufacturing Index. These indicators are a measure of
general health in the Japanese economy. They are currently forecast to be a negative
number, indicating an economic contraction and hence may signal the possibility that
Japan will not release much positive data this week. Traders should also keep tabs
on the USD and EUR trends as they continue to be very dominant factors in the
movement of the market.

* OIL
Price of Crude Oil will be Heavily Influenced by U.S. Bailout Package
Crude Oil continues its decline; the contract price settled down at $106.89 a barrel
last Friday. Even though there has been some bullish momentum in the market for the
past few months, prices are still down 28% from record highs above $147 a barrel
reached in July. The main reason for that spike was the economic crisis world-wide
and high fuel costs which hurt demand in the United States and other developed
economies. The price of Oil is down now primarily because of the USD. The dollar
rose against the major currencies on Monday. Hopes that the bailout bill will soon
be passed and revive the U.S. financial system has spurred a rally in the U.S.
currency.

Moreover, the latest news that Iran, the world's fourth-largest exporter of Oil, has
avoided new sanctions in a United Nations vote over the weekend also put some
downward pressure on prices of Light Sweet Crude. However, the traders remain
cautious about the U.S. government's bailout package. There is some fear that this
risky package could generate a decrease in the demand for Oil. The market is paying
close attention to the U.S. lawmakers' upcoming vote later today, which will
establish future U.S. government policy regarding monetary and fiscal policy. A
possibility still remains that the $700 billion government bailout package won't
pass in Congress. In that case, a looming economic slowdown in the U.S. won't be
prevented and would cut demand in the world's biggest energy-consuming nation, which
will lead to further deterioration in the price of Crude Oil.

Technical News
* EUR/USD
The pair has retained its bearish inclination during the weekend and is currently
traded at the 1.4470 level. The 4 hour studies show that the current price has
dropped beneath the Bollinger Band's lower border, suggesting that another bearish
session is expected. Next target price might be 1.4350

* GBP/USD
After going through a mild bullish correction on Friday, the cable has resumed its
bearish trend with full steam as it dropped almost 150 on the beginning of the
trading week. As all oscillators on the 4 hour chart are pointing down, it seems
that another bearish movement might take place.

* USD/JPY
The pair is continuing to provide mixed results with no specific direction. However,
a bearish cross on the 4 hour chart's Slow Stochastic indicates that a downtrend is
imminent. Going short might be the right strategy today.

* USD/CHF
There is a very accurate bullish channel forming on the 1 hour chart, as the pair is
floating in the middle of it. And now, the Bollinger Bands on the 4 hour chart are
tightening, implying that another bullish move is forthcoming, with a target price
of 1.1100.

The Wild Card
* Oil
Oil price are continuing to fluctuate within a restricted range, and a barrel of oil
is currently traded around $105.20. Nevertheless, a bearish cross on the 4 hour
chart's Slow Stochastic indicates that oil prices should depreciate. This might be a
good opportunity for
forex traders to join a very popular trend.

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