The market is readjusting and that is clearly the resemblance of the prevailing instability! The heavy slump that dominated mostly the month of May which is finally coming to an end is being reconsidered by the market now as they pare their shorts and replay their cards as they speculate whether the decline is overdone or this is yet another bear trap!

Well surely we do see that the slump was extensive, excessive, and rapid and regardless of the fears, the panic was groundless which is confirmed by the vicious rounds of reasoning and speculation week in and week out; once it was the euro will breakup the next it was a relapse into global recession again all the way to credit freeze once again.

The irrationality was printed upon the dollar's rally and gold's new all time highs and stained by the Dow's short visit below the 10,000 psychological barrier! If we want to simplify it reality would be that the euro area is going to be affected by the budgetary burdens and the fiscal imbalance and austerity measures, but WILL SKIRT THE RECESSION and will avoid a relapse, not all the 16 are broke and though Spain is a major card player it will not default and will not drive the recession for the entire area. The export recovery will buoyed the fragile recovery and will force the euro economy to trail its rivals though will emerge over longer term perspective with stronger merits!

We are surely not that optimistic on the rebound seen in market, and I for one will not call it a reversal just yet. The decline was sever and the correction was bound to happen as the market needs to adjust to the new trading range created by the European debt havoc.

Haven demand was the first to pop into mind when mentioning greenback, though to me I would like to consider the unwinding of the heavy pessimism over the US outlook and stronger economic merits. The triggered correction is still evident on the dollar which declines further today ahead of the income report which is expected with a slowing rise from March continuing the disappointment of yesterday's unexpected downside revision to the GDP to 3.0%.

According to the dollar index, the dollar declined today further as the index hit the low of 85.84 and currently trading around 86.00 levels near opening areas of 86.26 and shy off earlier highs set at 86.66.

As for the euro, the single currency continues the second consecutive day of appreciation as investors unwind some of the pessimism after the euro seemingly bottomed out for now slightly above $1.21 areas. The euro rose to record the highest of 1.2452 after setting the low of 1.2280 today and currently hovering around 1.2404. We still see that the bigger picture is bearish for the euro, yet for now we favor the upside correction to continue for the single currency despite the expected dip due to negative momentum over intraday basis yet will continue biased to the upside today.

Sterling is not that strong today and only starting to head higher just now on the back of the weak dollar. The fall in consumer confidence weighed on sterling which is overshadowed by the credit crisis as UK is still under risk of slowdown and a double dip recession with the skepticism prevailing over the ability of the coalition government to contain the damage. The pair so far recorded a high of 1.4610 and a low of 1.4488 and lingering now around opening levels at 1.4582 as the pair attempts to reverse the morning endured losses and head to the upside.

As for the USDJPY pair the bias continues to be to the upside as the dollar advances against the Japanese yen on eased tension across the markets amid rising equities and commodities. The pair is still biased for further upside movement where the pair so far is trading bullishly around 91.27 after recording the high of 91.40 and the low of 90.82.