The Dollar extended its losses for a second day against the EUR and a basket of major currencies as Forex traders are anticipating a drop in the U.S. Preliminary GDP figures that will be released today at 1.30pm GMT time. On Monday the USD traded at $1.2953 per EUR at 4pm GMT time. This helped push the Dollar to the largest 2 day decline in a month of nearly 3%.

The Citigroup bailout plan helped correct the price of the Dollar against other major currencies as traders are keen in the short-term to make gains in more volatile currencies, such as the EUR and JPY. This has put downward pressure on the greenback in recent days as investors are seeking riskier day trades in other major currencies, rather than the safe haven U.S. Dollar.

The release of the U.S. Existing Home Sales Report yesterday also added to downward pressure of the USD. The report showed that sales of U.S. existing homes fell by 3.1% in October to a 4.98 million-unit annual rate. This data confirms that the U.S. housing market is still weak, and is consistent with the U.S. Federal Reserve’s recent assessment that the U.S. housing market is not expected to finish contracting until 2010.

Analysts anticipate the Dollar to slip further and to correct against the major currencies in the short-medium term as many Forex traders believe that the USD is overvalued.

Traders may well expect the USD to drop by at least another 1.5 % today as they weigh in on the expected drop in the U.S. Preliminary GDP Rates, which will be released later today. This is likely point to signs of further weaknesses in the U.S. economy.

Last week was filled with negative data from the U.S economy. The Producer Price Index (PPI) dropped for a third month in a row, landing on -2.8%, proving that consumers in the U.S are in a slump. The Building Permits survey dropped to a mere 0.71 million new permits that were issued in October, dropping for the fifth consecutive month. The housing sector in the U.S is one of the best gauges of the deteriorating economic condition as fewer banks are willing to provide a new mortgage which means fewer citizens are purchasing new homes. Last but not least was the Unemployment Claims figure, which reached 542K individuals who filed for unemployment insurance for the first time during the past week.

However, despite the unfortunate figures, the USD is refusing to slide. As stated here many times before, investors are currently seeing the negative data from the U.S as a pitfall for the leading economies, which will suffer greater from the ongoing decrease in U.S spending.

As for the week ahead, a batch of data is expected from the U.S economy. Traders should keep a close eye on four different indicators. First is the Existing Home Sales, which will be published today and will provide additional information on the U.S housing sector. On Tuesday, consumer related data such as the Preliminary Gross Domestic Product (GDP) and Consumer Confidence report are scheduled and will likely provide a better landscape of the consumers’ conditions in the U.S. Lastly, on Wednesday, the Unemployment Claims figure will be announced.

Forex traders should bear in mind that the last few weeks have shown that the U.S Dollar seems to be strengthening as a result of negative U.S data and not the other way around, which results in a type of pricing bubble. At some point the USD will meet an end to its recent bullish run.