(CEP News) It's a volatile day for USD/CAD following the U.S. Treasury's plan to purchase toxic assets, and better than expected U.S. housing data.

USD/CAD has traded in a one-cent range overnight and is reacting to equity markets. The cross appears to have formed a double bottom at the 1.23 CAD level and is trading near the bottom of today's range at 1.233 CAD.

Most of Monday's volatility is due to the news that the U.S. Treasury will invest up to $1 trillion to purchase mortgage-backed securities and other toxic debt. Over the weekend, the Wall Street Journal published a story releasing some of the proposed details. Those details were made official in a Treasury press release at 8 a.m. this morning.

USD/CAD moved higher following the release of the official report. Currency strategists said the stronger U.S. dollar reflects some uncertainty over the plan.

Steve Butler, director of FX trading at the Bank of Nova Scotia, said he sees the rally in the U.S. dollar as short covering as investors take some profits off the table.

It sounds like a great plan but I think people might have some questions as to exactly how this would work, he said.

The Canadian dollar recovered some of its losses following a better-than-expected U.S. existing home sales. Existing home sales grew 5.1% in February against expectations for a 0.9% decline, according to the National Association of Realtors.

Marc Chandler, senior currency strategist from Brown Brothers Harriman, said he is looking for the U.S. dollar to continue to weaken throughout the morning as risk appetite continues to improve.

Euro/USD down 0.43 cents to 1.3539

USD/CAD down 0.79 cents to 1.2329

USD/Yen up 1.24 points to 97.19

GBP/USD up 0.44 cents to 1.4509

AUD/USD up 1.14 cents to 0.6986

Euro/Yen up 1.30 points to 131.57

Euro/GBP down 0.59 pence to 0.9330

GBP/CAD down 0.67 cents to 1.7887

CAD/Yen up 1.50 points to 78.83

Euro/CAD down 1.64 cents to 1.6689

The U.S. Dollar Index is up 0.10 points to 83.94

All data taken at 10:36 a.m. EDT.

By Neils Christensen, neilsc@economicnews.ca, edited by Ernest Hoffman, ehoffman@economicnews.ca