The EUR USD started the day weak as traders were convinced the U.S. House of Representatives was going to pass the bill to rescue the U.S. financial system. Additional selling pressure came because of the bailout of Fortis by the Dutch government. The Dollar began to weaken in the early afternoon when it became clear the bill would not pass. Expectations are for the Dollar to fall further on Tuesday as the early word is the bill will not get voted on again until after Wednesday's Jewish holiday. There is also talk of a possible intervention by Euro nations to prevent wild swings in the market place. Look for strength to continue in the Euro until the rescue plan becomes law. Furthermore, look for the banking crisis to continue to spread across Europe. This may temper losses in the EUR USD. Once the bill is passed the Dollar should strengthen.

The GBP USD fell sharply lower in early trading as the U.K. government was forced to bailout Bradford & Bingley, a large British mortgage house. Additional pressure came from the anticipation of the U.S. Banking and Financial plan passing the U.S. House of Representatives. Traders sold Pounds and bought Dollars all morning. When it became clear in the early afternoon that the bill was not going to be passed, the GBP USD began to rally. This rally should continue into tomorrow as the rescue bill is not expected to be passed until late in the week. Watch for more banking issues to surface in the U.K. as the banking crisis is spreading globally.

The USD CHF and USD JPY fell sharply after early morning gains were erased when the U.S. stock market plunged on the news the U.S. banking rescue plan would not be passed. Traders seeking safety and security from the rapidly falling stock market bought the Swiss and the Yen. Many traders exited higher yielding equity positions and returned the money to pay off loans taken in Swiss Francs and Japanese Yen. Do not look for any strength in the USD CHF and USD JPY until the stock market stabilizes. This is not expected to happen until the U.S. government infuses the financial system with $700 billion.

Despite the bad news regarding the U.S. financial system, the USD CAD traded mostly higher on Monday. Most of the gain came in the early morning as traders bought U.S. Dollars in anticipation of the banking rescue plan passing the U.S. House. Weaker commodity prices - especially crude oil - also contributed to the weakness in the Canadian Dollar. By the end of the trading day after it became clear that the U.S. financial structure was in trouble, traders bought Canadian Dollars, softening the loss on the day. Look for weakness in the USD CAD as the bill to bailout the U.S. financial system is not expected to be passed until late in the week.

The AUD USD and NZD USD felt early pressure as traders bought U.S. Dollars in anticipation of the U.S. bailing out its financial system. Most of losses in the Australian and New Zealand Dollars were given back when the news came out the rescue plan vote came short of affirmation. Look for strength to develop over the next few days in the AUD USD and NZD USD as traders will pitch U.S. Dollars as long as there is no bailout plan. Furthermore, a stronger gold market should also help both currency pairs.

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