A late session surge in Europe is triggering a short-covering rally in the Euro and British Pound ahead of the U.S. opening. The Euro was down sharply overnight as traders reacted to Friday's bearish U.S. jobs data and the news that Hungary is the latest candidate for sovereign debt issues. Over the week-end the Group of 20 major economic powers concluded their meeting by issuing a more cautious outlook for global growth. Their primary concerns were the European debt crisis and the possibility that European fiscal consolidation will result in muted global growth. While the European and commodity-linked currencies suffered, the Japanese Yen benefitted from a strong surge in flight-to-safety buying. Shortly before the U.S. opening, the Dollar is starting to see some pressure. U.S. equity markets have turned positive, driving down the Greenback versus the Euro, British Pound and the riskier Australian, New Zealand and Canadian Dollars. Increased appetite for risk is also pressuring the Japanese Yen. This action ahead of the New York opening appears to be short-covering and only proves that the movement in the Dollar will be sensitive to risk sentiment today. Following the prolonged down move in terms of price and time in the Euro, traders should watch today for a possible closing price reversal bottom. The news is still bearish, but conditions may be oversold and may warrant a position adjustment before the next round of selling pressure takes place. The GBP USD was trading weaker overnight, but shortly before the New York session has regained a key retracement zone at 1.4499 to 1.4435. Intra-day traders should watch to see if a support base can be built at or above 1.4499. This action will be a sign that traders are attempting to form a secondary higher bottom which could lead to the start of a new rally. The stock market will dictate the direction in the USD JPY today. A strong stock market should support this pair especially if it can hold above the 50% price at 91.61 and regain the .618 level at 92.41. A weak stock market will drive up the Japanese Yen. Watch the action as the market trades both side of 91.61. Holding above it will be a sign of strength while a break below it will most likely lead to more selling pressure. The main trend is up in the USD CAD but trading conditions the past 7 days or so can best be described as choppy. The overnight rally failed to reach the last main top at 1.0853 and now appears to be ready to retest a retracement zone at 1.0481 to 1.0394. Look for volatility and sensitivity to the movement in the U.S. equity markets today. The AUD USD stopped short of reaching its most recent bottom at .8067 before short covering this morning erased most of last night's losses. The main trend is down, but short-covering could drive this market back to a 50% level at .8308 before new selling pressure hits the market. The main trend turned to down on the daily NZD USD chart late last week. Trading action overnight confirmed the weakness, but short-covering ahead of the New York opening could take this market back up to a 50% price at .6706. The strength of the short-covering rally will be determined by how it trades at this price. Regaining this level will indicate a surge to the upside. A failure to regain this level should attract fresh selling pressure.

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