European focus: USD corrects gains.[E]

The dollar fell for the first day in three against main currencies.

Inability to continue rally after overcoming the important resistance became a principal cause of USD long positions closing.

Some traders expected EUR drop versus the dollar to continue this week, but it hasn't and led to EUR bets.'' said Lee Ferridge, a proprietary trader at Rabobank Groep in London. The U.S. currency may retreat to $1.27/euro this week, Ferridge said. EUR gains amplified after Reuters reported the United Arab Emirates central bank governor said his bank will convert 10% of its $23 billion reserves into EUR.

This news gave an extra boost to the euro rally,'' said Niels Christensen, a currency strategist at Societe Generale SA in Paris. The major weekly data crimping on further USD moves will undoubtedly become FOMC meeting and the text of accompanying statement. More is that numerous speeches of Fed representatives push some analysts assume Fed can boost it's key rates on 50 b.p. by next week. Traders at the Chicago Board of Trade see a 12% chance of the Fed increasing the target rate up from an 8% chance at the start of last week. Inflation has surprised to the upside, inflation expectations also remain above the comfort level and markets are looking at a 50% chance the Fed move rates in August," said Marcus Hettinger, a currency strategist at Credit Suisse Group. We would be bullish on USD against everything." He added and foreshadowed further dollar gain to $1.2435 by the end of current week.