Forex Commentary:

The euro rose against the U.S. dollar on Monday in a volatile but illiquid session with investors reluctant to make large bets in case the U.S. Federal Reserve shows no sign this week of changing its easy monetary policy.

With many markets closed for the Easter holiday and no major U.S. economic reports on the calendar, the Fed’s meeting on Tuesday and Wednesday will be the key event risk this week as traders try to gauge the direction of U.S. policy.

The dollar index, which measures the currency’s value against six major currencies, was little changed at 74.024. However, many traders say it could test a three-year low of 73.735 hit last week. A break of that level could open the way for a test of the record low of 70.698 touched mid-July 2008, according to Reuters data.

Trading Setups / Chart in Focus:

Silver

Silver surged as much as 8 percent on Monday before pulling back sharply when a failure to pierce the all time high from 1980 unleashed a wave of technical selling amid record volume in U.S. futures.

We can see large bearish rejection bar formed, it’s pretty close to being a pin bar, although ideally we would have liked to see less of a lower shadow. However, price challenged the all-time high near $50 an ounce today and then pulled back sharply.

We could see a deeper pullback in the near-term towards support near the 21 day EMA / $42 an ounce. Alternatively, price may just consolidate sideways near current prices before the uptrend resumes.

GBPUSD

The GBPUSD has carved out a pretty clear support level near 1.6350; just above the 21 day EMA. If price rotates further to the downside we will watch for bullish price action trading setups to form near this level.

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Other Markets:

On Wall Street today stocks fell in what was the lightest volume session of the year.

Rising commodity costs will remain in the spotlight this week as a possible threat to stocks. This week will be one of the busiest for earnings with 180 S&P 500 companies scheduled to report.

The Dow dropped 26.11 points, or 0.21 percent, the S&P 500 lost 2.13 points, or 0.16 percent, and the Nasdaq dropped 5.72 points, or 0.20 percent.

Upcoming important economic announcements: 4/26/2011

10:00am EST: United States – CB Consumer Confidence
9:30pm EST: Australia – CPI q/q
11:00pm EST: New Zealand – NBNZ Business Confidence