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Overall, the dollar index saw more declines during the overnight session. European markets traded in the green, while oil and gold headed towards multi-month highs, both empowering the major currencies against the dollar. The dollar’s decline is expected to continue during the U.S. session, as investors consider the worst of the credit crunch is over.  

The Euro (Eur/Usd) traded within the same range during the early part of the overnight session as it did during Friday’s U.S. session. However, the pair surged higher during the European session, testing TheLFB R1 (1.4240) and, at the same time, a resistance line that has held since late December 2008.

The PMI release shows the Euro-area manufacturing side of the economy has contracted for twelve consecutive months, although the pace of contraction has slowed lately. The release number of 40.7 is slightly higher than what analysts expected.

The Pound (Gbp/Usd) was the top performer overnight, gaining 240 pips or almost 1.3%. In the last 11 days of trading, the pound had only one day of decline, in which it lost less than 30 pips. Over the last few weeks the pound has been propelled higher as evidence suggests the U.K. housing market may be approaching a bottom. In May, helped by some strong rallies, the pound returned 9.4%, the most in the last 25 years.

The U.K. Manufacturing PMI rose more than expected for a third consecutive month in May. Despite this, weaker global demand still outweighs any benefit from sterling's fall against major currencies, and domestic conditions were especially poor due to the crises affecting car making, construction and retail.
 
The Aussie (Aud/Usd) rose as much as 130 pips during the overnight session, testing TheLFB R2 (0.8135). For the moment, the pair is unable to break any higher, but the aussie’s outlook lies to the upside as long the commodity market remains bullish. Commodities are the main export products in Australia.

Retail sales in Australia have increased by 0.3 percent in March which is lower than analysts’ forecasts of a 0.5 percent increase. In original terms, Australian turnover decreased by 0.8% in April 2009 compared with March 2009. There was no percentage change for Chains and other large retailers (which are completely enumerated), while the estimate for 'smaller' retailers decreased by 2.3%. 

The Cad (Usd/Cad) saw very light volume during the overnight session, but was still able to move lower. The pair lost more than 100 pips, testing the 1.0750-1.0800 swing area. Similar to the aussie, the Canadian dollar was empowered by the strong gains in the commodity markets over the last few weeks of trading.

The Swissy (Usd/Chf) extended the strong declines seen on Friday, and fell some 60 pips overnight. On the daily chart, the swissy reached the lowest value of 2009 tonight, as the pair declined very strongly over the last few weeks, despite the SNB’s comments about intervening in the currency markets.  

The Yen (Usd/Yen) fell 60 pips during the Asian session, to TheLFB S1 (94.55). The pair was unable to break any lower and retraced the move completely during the first part of the overnight session. Shortly after the London open, the pair resumed its downward trend, but still was unable to break below the pivot point. 

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