The greenback relinquished some of its gains from last week against the major currencies, sliding near the 1.42-level versus the euro and just shy of the 1.6250-mark against the British pound. Amid lingering uncertainty over President Obama's proposal to restrict banking activities and the extent to which China will move to curtail an overheating economy, risk aversion remains the dominant theme in the global financial markets.

The FOMC kicks off its two-day monetary policy meeting tomorrow and will announce the results of its deliberation on Wednesday afternoon. While the Fed is not expected to change policy, leaving rates unchanged at 0-0.25%, the key focus will be on the FOMC policy statement. The Fed will likely reiterate the need to keep interest rates at exceptionally low levels for an extended period. Also, the Senate is slated to vote this week on Fed Chairman Bernanke's second term. It is also expected that Bernanke will be confirmed for a second term as Chairman of the Federal Reserve.

Existing home sales released earlier today disappointed market expectations, declining sharply in December by 16.7% and missing estimates for a decline of 10% from an increase of 7.4% in the previous month at 5.45 million units. The US data due out tomorrow include the November Case-Shiller home price index, the January Richmond Fed manufacturing survey, the November home price index and the Conference Board's consumer confidence survey for January.

Euro Stabilizes

The euro is searching for a floor following last week's sharp sell-off to 5 ½-month lows against the greenback, firming to just beneath the 1.42-level. Risk aversion and questions over Greece's fiscal crisis have battered the single currency since topping out around 1.5145 in early December 2009.

November industrial orders from the Eurozone sharply beat out estimates, improving by 2.7% on a monthly basis from a decline of 2.2% a month earlier and declining by 0.5% versus a decline of 14.5% in the previous year.

The session ahead will see key reports from Germany, with December import prices and the January Ifo business survey due out. Import prices for December are estimated to be flat from a 0.4% increase in the previous month and lower by 1.5% compared with a 5% decline a year earlier. The January Ifo business climate is estimated to improve to 95.1 from 94.7 and the expectations index is seen edging up marginally to 99.2 from 99.1. Meanwhile, the Ifo current conditions index is slated to improve to 91.2 from 90.5 in December. Also due out will be the Eurozone current account balance for November and the ECB November net investment flows.

EURUSD holds steady around the 1.4140-level will support seen at 1.41, followed by 1.4070 and 1.4040. Subsequent floors are seen at 1.40, backed by 1.3965 and 1.3930. Gains will target interim resistance at 1.42, followed by 1.4230 and 1.4270. Additional ceilings will emerge at 1.43, backed by 1.4350 and 1.44.