Late in the trading session, a short covering rally put the market higher on the day. This technically based action suggests the potential for a move back to 1.0335. On the downside, the target remains 1.0130.

Bank of Canada May Raise Rates 50 Basis Points

The USD/CAD continued its strong rally as traders are still considering the possibility of a 50 basis point cut by the Bank of Canada. At this time, financial market traders are pricing in a minimum 25 basis point cut. One more weak economic report will most likely cause the BoC to cut rates 50 basis points. Traders are considering this scenario and are unwilling to let up on the long side of the USD/CAD. Be careful buying up here as this is still a retracement zone. Be prepared to go long following a substantial corrective break.

Australian Dollar Could Not Make a New 25 Year High; Changes Trend to Down

In a surprise move, the Australian Dollar failed in its attempt to make a new 25-year high and sold off late in the session. The down move crossed the last swing bottom and turned the main trend down. Based on this action, look to sell the first rally.

Traders cite rumors that the Reserve Bank of Australia has lightened up its tone and may not raise rates as suggested last week. Be careful trading the long side as the surprise change in trend to down may trigger a sharp break, as protective stops are likely to be hit. The action also indicates the lack of buyers as the reason for the break rather than new sellers.

NZD/USD Falls Sharply Lower

The NZD/USD is selling off in anticipation of another interest rate cut by the central bank. Citing weakness in the economy especially in the housing sector along with weak employment numbers, new shorts have been pushing this market lower.

The charts indicate a move to .7536 is likely over the near-term. Look for resistance to sell at .7742.

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