Overall: Monday saw the dollar strengthen in response to the heavy selling of the greenback last week, as traders speculated the moves were overdone. Today, the dollar resumed its downward trend against the other major currencies as traders’ appetite for risk returned. The dollar remains on a slippery slope as the general consensus seems to be that the worst of the global economic crisis is behind us and the need for the greenback as a safe haven diminishes. The U.S. currency dropped today despite Fed Chairman Ben Bernanke saying last night that policy makers will help keep the dollar strong by containing inflation and withdrawing credit from the financial system in a timely manner.

The U.S. trade deficit widened for the first time in eight months to $27.6 billion in March, however, the number was lower than economists had expected. Exports slumped to a two year low. The National Association of Realtors (NAR) said today that home prices in the U.S. dropped the most on record in the first quarter from a year earlier. The median price dropped 14% to $169,000, falling in 134 of 152 metropolitan cities. Retail sales will be released tomorrow and are expected to show an improvement from the previous month. Import prices and business inventories will also be released. 

The Euro (Eur/Usd) The euro moved higher on Tuesday, breaking above the 1.3700 level before retreating and closing below the 1.3650 level. The pair posted a gain of approximately 50 pips erasing almost all of Monday’s losses. The higher moves came shortly after the London open, in-line with the S&P futures, but dropped during the U.S. session.
The Pound (Gbp/Usd) Tuesday was another day of wide movement for cable, trading in a range of almost 300 pips and closing higher by approximately 130 pips. The pair made strong gains during the European session, moving above 1.5350 but retreated during the U.S. session after the trade balance numbers were released. In contrast to Monday’s moves, the pound strengthened as economic reports from the U.K., including employment data and manufacturing, gave signs that the worst of the economic downturn may be over.  
The Aussie (Aud/Usd) The aussie strengthened on Tuesday, but was unable to erase all of Monday’s losses. Higher equity markets, rising gold prices and better than expected home loan numbers helped the Australian dollar. Home loans came in at 4.9%, higher than the analysts’ expected number of 4.5%. On the day, the pair gained approximately 65 pips, closing just below the 0.7650 level.

The Cad (Usd/Cad) The Canadian dollar closed the day with a slight gain against its U.S. counterpart helped by higher equity prices and rising crude oil prices that briefly broke above the $60 level today. The pair moved lower during the European session but recovered most of the lost pips during the U.S. session despite Canada posting a larger trade surplus than expected. The trade surplus came in a 1.1B which was higher than the 0.5B expected. On the day, the pair lost approximately 45 pips and closed just above the 1.1620 level.

The Swissy (Usd/Chf) The swissy declined 60 pips during the European session, erasing most of the gains made on Monday. However, most of the lower movements were retraced during the U.S. session as the dollar strengthened after the trade balance report, which although the deficit widened from the prior read it was lower than the expected number. On the day, the pair lost 30 pips, closing just above the 1.60 level.

The Yen (Usd/Jpy) The yen moved lower for the third straight day on Tuesday despite U.S. equity markets posting gains. The dollar continues to take a beating each time traders speculate that the worst of the global economic slump is over and become more risk tolerant shunning the safety of the greenback. On the day, the pair lost 100 pips, closing near the 96.50 level.