Fading risk aversion pushed the US dollar back and forth as market participants looked for a 100 basis point rate cut by the Fed, but the central bank failed to meet market expectations as they reduced the interest rate by 75 basis points.

Currency market intervention remains a hot issue this week, as the risk of physical intervention by the Bank of Japan has jumped significantly while European Central Bank President Jean-Claude Trichet engaged in some jaw-boning of the euro.

The US dollar remained relatively unchanged following an uneventful return from the US Thanksgiving holiday weekend.

Investor sentiment seems to be on the rebound, but signs that the credit crunch has merely gone into hibernation include the big hit to earnings reported by major US banks, the existence of SIVs in money market funds, and the substantial number of mortgages that may fall into default in the near future.

The British pound has been put into a holding pattern for nearly three weeks against its US counterpart as the market waits for a significant shift in fundamentals to usher the pair into the next leg of its trend.

Now more than ever, the fate of the US dollar and stability of the US economy hinges upon the outcome of tomorrow’s labor market report.

The bullish bias on the EUR/USD currency pair is strong as long as price is above 1.3663.

Currency technical analyst Jamie Saettele analyzes the euro against the Canadian dollar, Australian dollar, and New Zealand dollar.

Jamie Saettele favors the bearish side as long as price is below 116.46, as the decline from there is impulsive.