Overall, the currency market continued in risk-aversion mode during the European trading hours, even though the majors slowed the pace of decline. Treasuries, equities and commodities created some very profitable dollar-long positions overnight. Ahead, the U.S. calendar is empty, so it is likely that the market will remain driven by U.S. futures and by the overall assumption of risk. 

The Euro (Eur/Usd) was driven lower overnight, for the first time in the last five days of trading. The pair has fallen 95 pips so far, and managed to break below the support area formed by the 20 and the 100-day simple moving averages. The Euro-area calendar is light this week and is unlikely to affect the market significantly. 

German consumer climate remained steady for the month of May 2009. In the same time, the previous read, for April, was revised slightly higher, to 2.5. In March, German import prices fell by 0.4%, extending the record pace of declines set over the last few months. From March 2008, the index is down by 7.1%, the biggest YoY decline since 1987.

The Pound (Gbp/Usd) traded between the 20 and the 100-day simple moving averages during the overnight session. The pair has declined 100 pips so far, following the market’s overall direction. Last week, rumors circulated that the BoE intervened to support the pound’s value, but were never confirmed. 

The number of mortgages approved by the BBA fell to 26.1K in March, weaker than what analysts had forecasted. The previously released number, for the month of February was revised to 28.0K. In March, net mortgage lending rose by £3.7 billion, slightly above the average of the previous six months, while consumer credit rose by only £0.1 billion.

The Aussie (Aud/Usd) declined 100 pips from the Sunday session open, as the market was driven by risk aversion. If the aussie decline continues, it will hit the support trend-line that connects the 04/20/09 and the 04/22/09 lows. If the support line fails, the market may see increased selling orders. 
The Cad (Usd/Cad) rose 70 pips during the Asian session, but the move was halted shortly ahead of the London open. Crude oil posted strong declines during the overnight session, which should theoretically drag the Canadian dollar lower. There are no Canadian economic releases scheduled until Thursday morning.

The Swissy (Usd/Chf) moved lower, for a short period, after the Sunday open, but soon started to head higher, gaining almost 100 pips. During the overnight session, the pair managed to break above the 100-day simple moving average, but so far, the 20-day SMA has held. 

The Yen (Usd/Yen) is currently trading in an intra-day descending triangle pattern, with the trend-line that connects 04/24/09 and the 04/27/09 highs acting as resistance, and the 96.55 area as support. Usually, the descending triangle is a bearish formation, and from a fundamental point of view, the yen’s outlook lays to the downside, as long as S&P futures trade in the red.