The U.S. Dollar finished lower on Tuesday following reports from Europe signaling that an economic recovery may be starting. The EUR USD rebounded after a German investor confidence report improved more than estimated. This news combined with last week's GDP report showing growth in France and Germany may be enough to ignite the start of a rally. Despite support from the economic numbers, trader appetite for higher risk assets has to pick up or this rally will fizzle.

Based on the main range of 1.4447 to 1.4045, look for a possible retracement to 1.4246 to 1.4293.

A report showing that U.K. inflation was better than expected triggered an early session short-covering rally in the GBP USD that gained strength throughout the day. Traders had been looking for inflation to decline based on the recent comments from the Bank of England Governor Mervyn King. Lately he has been hinting that the slow down in the economy would continue.

The GBP USD erased all of yesterday's losses and closed in a position to retrace several days of weaker trading. Based on the main range of 1.7042 to 1.6274, traders should watch for resistance to form between 1.6658 - 1.6749.

The stronger stock market and general demand for higher yielding assets led to a profit-taking break in the Japanese Yen after several days of strength. The charts indicate that the USD JPY is under the influence of two ranges.

The first range is 91.73 to 97.77. This range created a retracement zone at 94.75 to 94.04. Yesterday's low stopped inside this range at 94.20, indicating that buyers may be interested at this level. If 94.20 becomes a short-term bottom then look for a retracement to 95.98 to 96.41 before selling pressure resumes. A stock market rally is needed to jumpstart this market to the upside.

Higher energy and stock prices triggered a short-covering rally in the Canadian Dollar after several days of weakness. The USD CAD bottomed the first week in August on weaker than expected Canadian employment news and has since gained strength because of dropping demand for higher yielding assets. Today's weakness marks the first day in a week where there are signs of profit-taking.

The daily chart indicates that the main trend is up with an upside target at 1.1177. If a short-term top develops at 1.1124, look for correction back to 1.0877 to 1.0819.

Strength in the equity and commodity markets may have temporarily stopped the decline in the higher yielding AUD USD and NZD USD. Today's action didn't erase all of yesterday's loss, but did indicate that these markets could be in a position to retrace at least half of the recent decline.

Concern about economic issues in China is leading to speculation that exports will fall. These worries along with a drop in demand for higher yielding assets have put pressure on the Australian and New Zealand Dollars since late last week.

The daily chart indicates that the NZD USD will turn the main trend down if .6597 is violated. The short-term pattern also suggests a possible rally back to .6539 to .6458 before new sellers step in.

The AUD USD is trading inside of two ranges. The first range of .7702 to .8477 suggests that the current break is likely to reach .8089 to .7998. The shorter-term indicator suggests that a bottom at .8156 could trigger a retracement to .8316 to .8354.

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