Markets are getting ready for an interesting week, with FOMC meeting the big event of the week, together with Bernanke€™s testimony in front of the Senate, which could be crucial for market direction and the dollar. The market participants are waiting for the bank to explain how the current monetary policy is working with low interest rates and potential inflationary dangers which could harm the economy further. The recent comments by Bernanke and co that they see €œgreen shoots€ in the economy are not proving to be of any substance and therefore traders always fear that another market downside could come in the coming weeks.

The EUR/USD is trading still within tight ranges and as today is Monday with not much happening in the economic calendar, we may continue to see 1.38-1.40. For now, 1.3830 is next important support level and as long as the pair trades above it, there is further upside towards 1.40. Traders may want to take advantage of these levels to either buy or sell until a clear breakout occurs.

The economic calendar is almost empty of important events with traders still digesting the G8 outcome, as world leaders agreed that economic recovery is ongoing and the need for countries to exit the current stimulus plans does not exist in current conditions. All the recent money that has been put into the system from central banks across the globe, are not seem to be making a lot of progress, according to the latest statistics and that€™s what creates further pressure for investors around the world who still are in search of ways to invest their funds. The dollar is still preferred as safe haven currency, as traders fear to place their bets on riskier assets, hence the stocks and equities weakness and also oils recent slide below $65.

The trading action today has been very quiet, as traders are getting ready for the coming events of the week, with inflation numbers out this Wednesday, which will show if indeed the analyst€™s inflation fears are true. The monetary meeting will shed more light as to what the bank will do regarding the interest rates, and if Bernanke does not imply a rise, investors may sell the dollar as an aftermath. Also, it is crucial to see any changes in the statement form last month concerning the economic recovery and how the bank will exit the current monetary stance if things are improving. Basically, currencies are in a wait and see mode for now, and the dollar€™s resilience to break either way against its major counterparts, gives us an uncomfortable feeling, that something big is coming in the next few weeks.

For now, let€™s see how the dollar will move against the euro and pound towards London closing and is GBP/USD will manage to break on the upside once again towards 1.65, amid absence of important economic events€¦