The dollar continued to gain overnight against its major counterparts, with EUR/USD trading below important 1.39 and GBP/USD finding it hard to gain above 1.61, after new regulations and plans were introduced yesterday by Alistair Darling, concerning the banks and their survival. The reality of that matter is that investors are not in a euphoric mood any more regarding the economic outlook and there is the feeling amongst traders that something is€ cooking underneath the rallies we see every now and then, and that it may progress to another market crash later in the year, amid inability of world economies to recover in a timely manner.

The EUR/USD is trading still between tight ranges and the pair found a support for now at 1.3860 as we mentioned the other day. The latter level is very important for the pair to hold for now, therefore next level to watch will be 1.3960 ahead of 1.3930. A clear break of those levels will take the pair above 1.40. Basically, for now, unless we have breakout of 1.38 or 1.40, best way to go is to buy or sell those ranges. The euro does not have any data today, so therefore the moves may be influenced by the pounds direction, what with BOE€™s rate meeting the next big thing.

The economic calendar has a few important economic releases out today, with the main one being the BOE€™s monetary meeting, which is expected to provide some kind of volatility, although the rates are expected to remain unchanged for the time being. The pound is in a wait and see mode these days and the range for GBP/USD is 1.60-1.65 for the current time. It is vital for 1.60 to hold for now, if further upside is to be seen. With all the political instability and financial trouble that UK is still facing, it makes it hard for traders to stay €œfaithful€ to the British currency, as conditions seem to although improve slightly, nevertheless still deteriorating at a fast pace. Also, later on we have the jobless claims out of US, and this will be monitored closely by traders, after the worse than expected non far payroll the previous week. If the numbers continue to disappoint, further speculation about the economy could hit the markets and the dollar may benefit once again.

The G8 is still controlling the markets attention and although there has not been any mention for currencies and especially the dollar,-something which most traders were expecting to happen, the fact that world leaders don€™t see economic recovery materialising as fast as initially predicted, keeps investors in the sidelines for now, and makes risk aversion a possible threat. Only the fact that the 8 biggest economies decided that they wont stop the stimulus efforts just yet as it was initially mentioned, makes us wonder, how €œgreen€ were the latest €œgreen shoots€ in the economy.

Stocks are slightly up since early European session; however let€™s see how New York will open and how traders will react to further G8 rhetoric and economic numbers later on. One thing is certain for now, the current environment does not inspire one to start building long positions in stocks, equities or commodities and that is why, we see investors seek alternative investments. Also, with summer progressing and more traders planning their holidays, there is that risk of another choppy and dangerous markets action , one that could very well resemble last years €œtragedy€€¦