The dollar started to show signs of fatigue on its upside move that we witnessed recently and EUR/USD together with GBP/USD held the levels we mentioned yesterday and therefore both pairs continued higher above 1.39 and 1.60 respectively. The reason so far seems to be the fact that traders are losing their confidence that FED will hike its interest rates soon, after recent comments from members of the bank said that rates are appropriate for now. The inflationary dangers are real for the coming future and traders know this very well hence the negative sentiment we see in the last few days. Rising inflation means rising dollar and rising problems for the economic and markets are aware of this.

The EUR/USD is trading heavily along with the GBP/USD and next level for the pair seems to be 1.40. We need a clear break of 1.4030 to 1.4060 in order to say that further upside is to be seen. So far the euro seems strong and don€™t forget that aside from all fundamental data that we get every day, traders always look at the interest rates situation and the reality is that ECB is clear about the fact that no more rate cuts will occur, however FED€™s picture is looking more gloomy by the day hence the dollar€™s inability to perform.

The economic calendar is almost empty today, with a few releases out of Euro zone and US, however nothing earth shattering, so traders are only reacting to their latest feelings about the whole economic recovery scenario which lately seems to be a science fiction. There have been many comments from US officials and other EU ones about recession ending soon; however there is a feeling amongst traders that the recent rally is nothing but a correction from the lows before further downside occurs.

The better nonfarm payroll data we saw last Friday, together with highest unemployment rate in US for at least 25 years, makes one wonder how accurate are those numbers in order to tell us that the worse is over. According to the President of US, recovery is starting to happen and more jobs will be open in the coming months as more money will be put into the system. Only yesterday, Obama declared that he was going to deliver more than 600.000 jobs out of his recent stimulus plan; however this was far from reassuring as the stimulus plan of more than $740 billion still needs time to work.

The stocks and equities are trading mixed since early Europe and the same is happening in New York. Investors are at a loss as to how they should move from here and the general feeling is that until there are clear signs to either way, the best way is to remain aside. The fact that summer is here and most traders are planning their time off makes things even more choppy and one day€™s rally can easily be reversed the next day€¦