Major USD Pairs: Lots of Action:

The dollar moved sharply higher for a second day versus its major counter-currencies. The election of a Republican to the US Senate seat in Massachusetts was given as a partial explanation for the USD bullish sentiment. Investors speculated that the election might eventually lead to cuts in government spending and a reduction in the deficit. Economic news released from the US was mixed today. December housing starts were worse than expected, but December producer price inflation doubled expectations.

The Eurodollar fell to five-month lows, partly due to continued worries about Greece's huge budget and its potential effects on the EZ, and partly due to dollar strength. The euro's skid below the $1.4250 support level led to a sustained drop during the night. The pair found tested a few support levels on its way down to $1.4080 support, followed by a weak retracement to the $1.4100 level, where it is trading at the time of this writing. The Eurodollar is expected to remain under pressure in the mid-term, as the US economic recovery takes more shape and the EZ recovery is looking a bit more murky.

Weaker-than-forecast Canadian inflation consumer inflation data helped lead the USDCAD higher. Meanwhile, reports that some Chinese banks have been instructed to curb lending weighed on commodity currencies such as the AUD and NZD and gave further support to the USD.

EURUSD - Past 2 Days

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