Monday's rally in the EUR/USD came to a fast end on Tuesday as comments from Fed Chairman Bernanke turned the Dollar around. Traders had aggressively sold Dollars on Monday because of the developing financial problems at Fannie Mae and Freddie Mac. Shorts had to cover quickly today because Bernanke's announcement came as somewhat of a surprise.

In his comments, Bernanke alluded to leaving open the discount window into 2009 for securities dealers to have access to direct loans from the central bank. The original plan was for six months, ending in September. Bernanke's action was well received by the market as it has the appearance of the Fed taking positive action to alleviate the ever-growing weakness in the U.S. financial sector. If this extension can help the financial sector recover, then this will be one less problem the Fed has to worry about, and it can refocus its energy on stimulating the economy while preventing an acceleration of inflation. Look for support at 1.5606 to 1.5534. Resistance comes in at 1.5760 to 1.5795.

The USD/JPY rallied on the strength of the U.S. stock markets. Traders have been trying to bid this market up since early last week, but most attempts have failed into the close. Tuesday marked the first day in awhile where the market was able to sustain gains into the close. Stable financial markets along with lower crude oil were also supportive. These positive factors made the stock market more attractive to traders who wanted to take on more risk. Look for this pair to follow the direction of the stock market. Support moves up to 105.98. Resistance is at 106.72.

The GBP/USD is expected to feel downside pressure as both the service and manufacturing sectors are experiencing a contraction. Talk is even circulating that the U.K. is headed toward a recession. Falling property values and housing prices have been putting pressure on the Pound for several months. Combined with the contraction in other sectors, this may develop into a serious economic problem. Weakness may develop in the GBP/USD on a close under 1.9768, with the next downside target at 1.9588. Look to sell a rally to 1.9828 to 1.9840 if given the opportunity.

The USD/CHF could get explosive if the stock market begins to catch its legs. This pair is running into some resistance at a retracement area at 1.0326 to 1.0376. The more this area is tested, the weaker this area will get until there is an upside breakout. Once resistance is overcome, the market could continue on up to 1.0541. Traders have been getting a little less risk averse for about a week now. Traders have been selling the Swiss, as the appetite for risk seems to be increasing because of the oversold conditions in the U.S. stock market. Bernanke's comments on Tuesday appear to have been well accepted by the market. Look for a breakout to the upside if the U.S. stock market can follow through to the upside.

The USD/CAD rallied on Tuesday as traders decided to buy U.S. Dollars and sell Canadian Dollars as commodity markets, driven by weaker gold and crude oil, fell sharply lower. This market has been flipping between following commodity prices and economic reports for months. If the commodity markets collapse as some are forecasting, then expect the USD/CAD to rally to 1.04. If this is just a short-term correction in the commodity markets, then expect a range-bound trade. One sign of developing strength is the potential breakout over 1.0218. Up trending support comes in at 1.1068.

Weaker commodity prices along with a slowdown in the Australian economy are putting pressure on the AUD/USD. Key exports such as wheat and gold are feeling downside pressure as the Dollar strengthens. A report showing a slowdown in construction and another showing fewer job-vacancy ads is also causing traders to believe that the Reserve Bank of Australia may through raising rates the rest of the year. Although a couple of weeks ago this market was poised to break out over .9700 on its way to par, the market has not been getting any bullish news lately. Chart watchers expect the market to pull back into a support zone at .9497 to .9457. The main trend is still up so there may be some technical buying in this retracement zone.

A report showing that profit expectations are declining is another bearish blow to the New Zealand economy. A long period of rising crude oil and falling stock markets have also put the NZD/USD in a weak position. This market is starting to price in the possibility of an interest rate cut by the Reserve Bank of New Zealand. Major support is at .7445; if this price fails, then look for a further decline to a 50% price at .7427. Oversold conditions may bring in some short covering. Sell a rally to .7622 if given a chance.

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