A new week starts today and so far the dollar is still feeling the “wrath” of the euro, following the pair gaining more than 700 points since the beginning of last week. The market sentiment is slightly more positive these days and Asian session has so far gained more than 400 points on the back of investors’ confidence that the US government will save the automakers from failing. We have seen in the last few days that risk aversion seems to be nonexistent and the correlation between the futures market and the currencies is losing its momentum. Don’t forget that in the last few months, the dollar was gaining across the board, especially against the euro, when we saw weakness in DOW JONES and the stock markets generally. What is happening? Have investors finally found their appetite for risk? Are they ready to say the economic conditions look a bit more hopeful? Not very likely I'd say, as the economic data is still bleak from the US and Europe and it's likely this situation will continue in the coming months. One factor which plays an important role in the dollars sudden negative turn is the fact that the month of December usually finds traders closing their trading books for the year end, therefore adjusting their positions after the events of the year. Now, considering the greenback has gained so much during the last 6 months, making new multi year lows almost daily, it makes one wonder if it's time to book the profits and move on. Today the economic calendar has a few important releases with TICS data out of the US and also the Empire State Manufacturing Index, which unless their number deviates a lot from the forecast there is not a lot of reaction expected. This week all traders will have their eyes and ears upon the FED’s monetary policy meeting tomorrow and although markets have priced in a 50 point rate cut, there are many who speculate that Bernanke could go even lower. Some analysts think the latest economic data, especially the payroll data, suggests that in desperate times, we need desperate measures and therefore the FED may cut 75 points and be done with it until signs of recovery can be seen. One thing is for sure, tomorrow the volatility will be huge and we may see whipsaw action before and after the release as traders will want to assess the decision and what it means for the economic future. Today the EUR/USD is trading higher, printing yet another multi-week high at 1.35 before it retraced back towards 1.34. The trading action so far seems muted, with today being Monday, and also with traders not ready to commit either way before tomorrow’s interest rate announcement. Next level to watch on the upside is 1.3570. A clear break could open way to 1.36-1.3630. The daily trend is up and we need 1.3360 to hold for now in order to talk about further gains. Let’s wait and see what happens and how traders will position themselves for tomorrow's FED decision, which is expected to make some noise in the markets and could even show us if the dollar’s recent weakness will continue.