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The USD saw a traumatic day of trading yesterday as it stretched as high as 1.48 versus the EUR, and spiked up to 1.8636 against the GBP. This sharp decline in the value of the USD comes from the ongoing financial crisis and the fact that the recent rescue plan has not yet produced enough confidence in the future of the financial sector. Investor uncertainty lingers over the question of whether or not this plan will do the job, especially when many of its details may not get released until later next week. Until then, the USD will continue to bear the brunt of the recent volatility emerging from this crisis.

Another player in the USD’s recent drama is the sharp climb in the price of Crude Oil. As October contracts came to a close, traders dove into the craze over black gold and watched with joy at the record-high one-day jump in the price of Oil, adversely affecting the USD - as Oil is bought and sold in dollars - pushing its already weakened value to a lower mark.

Looking at today’s trading, there will be two crucial testimonies given by U.S. Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson. These will represent the initial steps in the deliberation and implementation of their newly proposed economic rescue plan. They are expected to emphasize their latest actions concerning the $700 billion bailout, Fannie Mae and Freddie Mac, the investment bank failures, and other financial problems. Their testimony will take place at 14:00 GMT in front of the U.S. Senate Committee on Banking, Housing and Urban Affairs. Traders should watch these speeches carefully as they will no doubt bring extreme volatility to the market, especially on the direction for the USD over the next few days.

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Last week was an exceedingly bearish trading week for the USD against most of its currency counterparts. Although the USD ended the week pretty close to its previous value versus the JPY, the greenback lost a lot of ground to its other major currency rivals. With a lot of news coming throughout the week regarding the American financial crisis, the USD saw very high volatility. Against the EUR, the USD was traded above the 1.45 level; as well as being traded above the 1.83 range versus the GBP. This past week was one which the USD would like to forget.

The financial news that came out last week got most of the spotlight in terms of its effects on the USD. As Lehman Brothers went bankrupt and AIG showed major worries, the American markets saw a lot of negative momentum and value lost. The economic indicators that were released last week were not very supportive of the USD’s bearishness either. The Industrial Production, CPI, TIC Net Long-Term Transactions, Building Permits and Unemployment Claims all came out worse than forecasted. In fact, none of the major releases for the USD beat forecasts this week. The only positive economic indicator released was the Federal Funds Rate which was held steady at 2.00%.

Looking ahead to this week, most of the economic releases are expected to be worse than their previous figures. A lot of volatility may occur after Fed Chairman Bernanke makes statements regarding the new economic rescue plan. These will occur daily starting Tuesday and lasting through Thursday this week. He will be testifying about the current financial situation; traders should follow his words and look for a solution to the current crisis with government intervention. The main economic data that will be released and should be followed during this week will be the Existing Home Sales, New Home Sales, Core Durable Goods Orders, and Unemployment Claims. Overall it seems like this will be another volatile week for the greenback while Bernanke is expected be the center of the stage in terms of driving the USD’s trading trends in the market this week.

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