The dollar index continues to recover from the 72.00 zone, bolstered by a more neutral stance from the ECB last week. Better than expected, although still quite negative, US jobs data last week served to underpin the greenback as well.

The market also seems to be anticipating some fresh dollar supportive jawboning out of the G8 summit which began in Japan today. In addition, Fed chairman Bernanke will speak at the FDIC forum on Tuesday and the market will be attune to any clues regarding a potential Fed rate hike.

Given that Mr. Bernanke will be speaking on mortgage lending specifically, I wouldn't expect any decisively hawkish comments. With the housing market still in a rather sharp decline, any hint that borrowing costs will be increasing would have a negative impact on demand.

A slight easing of tensions in the Middle East may also be playing a role in gold's pullback. Bloomberg reported on Friday that Iran gave a "constructive" response to the latest offer of incentives aimed at encouraging the nation to halt its uranium enrichment program.

The EUR-USD rate has found support just ahead of the 1.5600 level, bolstered by a convergence of the 20, 50 and 100-day moving averages. A short-term rebound above 1.5700/27 is needed to ease pressure on the downside a call for renewed probes above the 1.5800 level. A move back above the latter would return considerable credence to the (dollar bearish) scenario that calls for an eventual retest of the 1.6020 all-time high.

The dollar has bounced against the Swiss franc as well, moving back above the 100-day moving average. The 50 and 20-day MAs have capped the upside thus far. Risk aversion flows have benefited the Swiss franc in recent weeks, a trend that is likely to continue. Scope remains for a return to parity.

USD-JPY has regained the 107.00 level as the yen weakened on heightened worries over a slowing Japanese economy. High commodity prices are hitting the island nation particularly hard. However, solid resistance at 108.58/60 is seen as limiting on the upside.

GBP-USD plunged back below the 1.9700 level after failing to sustain last week's brief probe above 2.0000. UK manufacturing and industrial production for May came in much worse than expected at -0.5% m/m and -0.8% m/m, respectively.

These data show that the UK economy is slowing rapidly, reducing the likelihood of a rate hike later this year. These shifting expectations have weighed on Sterling and given the dollar some additional support. The BoE is widely expected to hold steady on rates when the MPC meets later this week.

While the dollar is engaged in a modest correction, the corresponding dip in the yellow metal is seen as another buying opportunity within the range. Buying interest is expected to be good ahead of the pivotal $900 level.

A short-term rebound about 932.00/936.27 is likely to lead to a retest of the 946.35/954.70 resistance zone. Penetration of the latter would confirm potential for renewed probes above $1,000.

Gold Market Movers:

German industrial production for May -2.4% m/m, well below market expectations.

UK manufacturing production for May -0.5% m/m, well below expectations.

UK industrial production for May -0.8% m/m, well below market expectations.

Taiwan CPI for June surged to 5.0% y/y. Exports +21.3% y/y.

Rising commodity prices, threats of global recession and the African economies

OPEC president blames ethanol for crude-price rise

Americans spending more on gas than cars

Waiting for stocks to rally? Don't hold your breath

Gulf states urged to rethink dollar pegs