The dollar extended gains against the Yen and pared losses against the EUR on Monday after data showed business activity in the U.S. manufacturing sector came in stronger than expected in January. The Dollar has been sold off recently partially due to growing optimism about the outlook for the U.S. economy. By yesterday's close, the USD fell slightly against the EUR, pushing the oft-traded currency pair to 1.3930. The USD did see bullishness as well, as it gained over 50 points against the JPY and closed at 90.70.

The U.S. manufacturing sector showed the best growth in more than five years in January. The Institute for Supply Management said its manufacturing index, climbed to 58.4% in January, up from December 54.9% level. It was the sixth consecutive monthly rise in PMI and the highest reading since August 2004, eclipsing analyst expectations. The strength in U.S. manufacturing is being accompanied by factory expansion from China to Europe.

Another report today showed personal spending rose 0.2% in December, the third straight gain, showing job growth is needed to help drive consumer spending in coming months.

Looking ahead to today, the most important economic indicator scheduled to be released from the U.S. is the Pending Home Sales at 15:00 GMT. Traders will be paying close attention to today's announcement, stronger than expected result may boost the USD in the short-term. Traders should pay close attention to the market as there is an opportunity for traders to capitalize on the fluctuations which are likely to follow this release.