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After taking a beating last week, the USD is beginning to show some small signs of recovery. Starting the week clouded by uncertainty and straining under market anxiety, the USD sustained blow after blow from the impact of deliberations about a U.S. economic rescue plan, and worse-than-forecasted economic indicators. The verdict is almost out as news from Washington is indicating that a breakthrough was made over the weekend and the bailout package is almost set to be passed into law, giving the U.S. Treasury more authority over the financial workings of domestic banks and financial institutions and, in theory, stabilizing the recent financial crisis.

Generating less volatility than expected, the market last week was characterized more by lack of direction than anything else, as analysts struggled to predict the movement of the major currencies. The $700 billion rescue plan, the largest financial bailout since the Great Depression, if enacted, could put an end to this currency flotation and send traders en masse back to regular trading. Fed Chairman Bernanke and Treasury Secretary Paulson are both pushing Congress to pass this legislation as quickly as possible. But is this bailout package a blessing or a curse? With the potential to correct the economic woes of today’s market, it also pushes the U.S. financial system closer to socialism and farther away from the capitalist economy which gave it its most powerful boost following the Great Depression and World War II. Analysts are divided about the short- and long-term costs and benefits of this package, but only time will tell which side was right.

Looking at the expectations for today, traders can anticipate less volatility with the USD as few major indicators are set to be released and the bailout package is still being discussed. Unless a major decision is passed regarding the bailout, the USD is expected to remain rather stable versus its currency counterparts. Looking at the rest of the week, traders may look for larger amounts of volatility come Wednesday as ADP Non-Farm Payrolls are expected, followed by the actual Non-Farm Payrolls figure to be released Friday. These indicators typically generate high trading volume, as well as market volatility, as traders anticipate their impact on the market. Traders should start the week looking to set up beneficial positions for what could be a big week in the Forex market.

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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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