Another week has started with dollar still on the defensive, after last week’s very bad economic data and further speculations that America is heading for recession.

EUR/USD closed last week well above 1.48 and that is certainly not good news for dollar bulls. If this week’s data are still negative, the pair might be heading for 1.49 ahead of 1.4965 which was the record high.

Today the only important economic release is existing home sales and traders will be monitoring this closely in order to asses if the problems in the housing sector are still visible.

This week has a few important economic indicators starting tomorrow with PPI out of the US which will be watched closely by the markets after the high CPI numbers we had last week. Many speculate that FED will cut rates again in the next meeting after Bernanke’s testimony regarding the economic problems.

Also we have durable orders in the coming days, which are forecasted to print a negative number and consumer confidence which again is awaited to be on the negative side.

The big event of the week though will be the testimony by Bernanke in front of the Congress, in which he will answer questions regarding his latest moves in the interest rates and also the problems which aroused due to the subprime mortgage. It will be very interesting to see how the markets will react in this speech ad what that would mean for the already weak dollar.

Don’t forget that tomorrow we have the German IFO out and this is very important for the latest euro rally which can be stopped if the number is much lower than expected. The fact that European officials are still hawkish in their tone regarding inflation and Trichet himself has said over the last weeks that inflation is more important than growth at the moment, is giving the European currency strength against most of its other counterparts, but that can easily change if economic data come out weaker than last months.

EUR/USD is still holding above 1.48, and a clear break of 1.4850 will open the way to 1.49 ahead of 1.4920. On the downside, a clear break of 1.48 might send the pair down to 1.4660.

GBP/USD is trading just above 1.96 but long positions can be tried at 1.9585 for at least 1.97 which is the last Friday’s tops.

USD/JPY is trading above 107 and shorts can be tried at 107.55-60 for testing last Friday’s bottom at 106.85

Let’s see how the currencies will behave today, as it is the first day of the week and how will traders position themselves for the big events this week...