The dollar sold off sharply in the Tuesday session, tumbling to its lowest level against the Aussie since August 2008 at 0.8917 and slumping versus the Canadian dollar to its lowest level since September 2008 at 1.0549. Commodities climbed higher, with spot gold touching a fresh record high beyond the $1,040 per ounce level and crude oil edging up past the $72 per barrel level. The catalyst for part of the move was unsubstantiated rumors that the Mid East oil producing nations would soon abandon the US dollar as the pricing currency for oil.

The US economic calendar is light this week, with the reports due out toward the latter half of the week including weekly jobless claims, wholesale sales, wholesale inventories and the August trade deficit.

Aussie Surges on Surprise RBA Hike

The Australian dollar spiked to its highest level since August 2008 at 0.8917. The Reserve Bank of Australia caught markets off-guard with an unexpected 25-basis point rate hike in the early Tuesday session, triggering a sharp move from 0.8756 to 0.8843 minutes after the monetary policy announcement. In the subsequent press conference, RBA Governor Stevens sounded an optimistic tone on the global economic outlook, saying the global economy is resuming growth with the prospects for Australia's Asian trading partners appearing to be noticeably better. Further, Stevens stressed that growth in China has been very strong, which is having a significant impact on other economies in the region and on commodity markets. Stevens expects economic growth in Australia to be close to trend in 2010, saying that economic conditions in Australia have been stronger than expected and measures of confidence have recovered.

AUDUSD continues to firm around the 0.89-level, holding onto the bulk of its rate hike triggered gains. Interim resistance is seen at 0.8920, followed by 0.8960 and 0.90. Subsequent ceilings are eyed at 0.9040, backed by 0.9070 and 0.91. On the downside, support starts at 0.8850, followed by 0.88 and 0.8760. Additional floors are seen at 0.8730, backed by 0.87 and 0.8665.