The U.S. Dollar traded mixed in a tight and narrow range. The trade weighted Dollar Index finished slightly lower after confirming last Friday's closing price reversal top.
The lack of major U.S. economic reports on Monday helped hold the Forex markets in a tight range as investors awaited testimony later in the week from Fed Chairman Bernanke. His comments should move the markets especially if they come after a few days of range bound, directionless trading. His testimony before the House Financial Services Committee is expected to be about employment growth prospects and whether fiscal stimulus is needed.
Traders will be looking for Bernanke to give them clues about the timing of future U.S. interest rate hikes. In addition, he may be asked to explain why he hiked the discount rate last week.
The Euro finished lower as investor confidence evaporated following a failure by the European Union to reach an agreement with Greece regarding its fiscal responsibility. Depending which side you talk to, the EU and Greece are either very close or far apart.
The GBP USD traded flat to higher, but inside Friday's range. Traders were covering short positions after the recent sharp sell-off in an effort to lock in profits. There has been no change in the fundamentals. The budget deficit, weak economy and lack of confidence in the Bank of England are still the catalysts behind the weakness in the British Pound.
Risk sentiment drove the USD JPY lower. Traders were acting a little jittery about holding on to risky assets. This helped to support the Japanese Yen.
The weaker Euro helped to support the USD CHF. Traders reacted as if the falling Euro would trigger another round of intervention by the Swiss National Bank.
Lower gold and last session weakness in crude oil helped to underpin the USD CAD. Technically this market is in a position to form a daily closing price reversal bottom that could trigger the start of a short-covering rally.
The AUD USD and NZD USD were up but well off their highs. Both of these markets tried to break out to the upside, but risk sentiment helping to limit gains. Traders are waiting to take clues from Fed Chairman Bernanke's testimony. These markets will be sensitive to stock market volatility and direction.
