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Overall, the market shifted between risk-aversion and tolerance mode on Tuesday, similar to how the spot equity markets traded. The European session sent the majors higher compared to the dollar, but then the U.S. session reversed every move made earlier in the day. Interestingly enough, the currency market followed a similar pattern on Monday, but only then, it was the other way around (the European market drove the dollar higher, but then the market recovered throughout the U.S. session). Ahead, the Asian market is expected to move slowly, but remain in a risk-aversion mode, something that should strengthen the dollar and the yen.
The Euro’s (Eur/Usd) trading pattern can be very easily split into three parts on Tuesday, with each part coinciding with one trading session. As such, during the Asian session, the euro declined 80 pips, surged higher throughout the European session, but then reversed every pip it gained earlier during the U.S. trading hours. For now, the euro is trading 60 pips below Tuesday’s open price.
The Pound (Gbp/Usd) headed lower most of the time on Tuesday, as sources have been told that the Bank of England is seeking rights to increase the size of the asset-buying program. Moreover, Exchequer Alistair Darling is setting up plans for the unwinding of any other British financial institutions failing again. These two reports added a lot of downside pressure to the pound, which ultimately sent the pair 150 pips lower.
The Aussie (Aud/Usd) rose 80 pips during the first part of Tuesday’s session, but the pair turned around shortly after the U.S. open and declined an additional 50 pips. On the daily chart, the aussie is trading just above the 0.7900 resistance area, which has held the pair for approximately two weeks now.
The Cad (Usd/Cad) traded on very bullish momentum throughout the European and the early U.S. sessions, but even so, the pair was unable to sustain the move it pulled over this period. Moreover, the cad reversed even though the Building Permits and the Ivey PMI printed much better than expected numbers. Currently, the cad is trading near the 1.1670 area, where the pair topped on Monday.
The Swissy (Usd/Chf) swung most of the day around the 1.0850 area, similar to how the euro behaved on Tuesday. For a short period, the swissy even managed to break below the 20-day moving average, but the pair was unable to sustain that move. For now, the swissy is trading 50 pips above Monday’s close, and still a few pips away from the 1.0900 resistance area.
The Yen (Usd/Yen) spent most of the day trading in a 30-pip side-ways channel, trying to break above the neutral pivot point (95.30). The breakout never came, something that caused the yen to move lower at the same time with the S&P futures. During the intra-day session, the yen had a very light volume of trading, which caused the pair to drop 50 pips.
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