The U.S. Dollar traded weaker on Tuesday in a continuation of the rally that started Sunday night.  Stronger equity markets helped fuel a greater desire for higher risk assets.  The G-20's pledge to continue to provide financial stimulus to the global economy was a huge factor contributing to the rally.  The thought of pumping more money into the global economy triggered renewed demand for equities and commodities with industrial metals leading the way.  Traders also reacted favorably to renewed questions about the role of the Dollar as the world's number one reserve currency.

The EUR USD surged to the upside while making a new high for the year. German economic reports this morning offset each other, leading to the belief that this rally is being fueled by a desire for higher yielding assets.  This morning's reports showed a rise in German exports but weakness in German industrial production.  The Euro is now in a position to test a major 50% area near 1.4700.

An unexpected rise in British industrial production along with greater demand for higher yielding assets helped support the rally in the GBP USD.  Today's upside action helped this currency pair test 50% of the August break.  One reason for today's rally could be position squaring ahead of this week's Bank of England meeting.  In light of the recent improvements in the economy, short traders are nervous about whether the BoE will make adjustments to its quantitative easing program.  In early August the BoE triggered the start of the recent break by announcing the expansion of its asset buyback program.

The USD JPY traded under pressure throughout the day.  The desire to hold Japanese Bonds over U.S. Bonds helped fuel demand for the Yen.  The carry trade does not seem to be a factor today even though U.S. equity markets are trading higher.

Stronger energy prices coupled with firm U.S. equity prices helped trigger demand for the Canadian Dollar.  The strong rally in industrial metals also contributed to the rally.  Traders have to be leery of potential Bank of Canada action if the Canadian Dollar makes a new high for the year.  The BoC is already on record saying a strong rise in the Canadian Dollar is likely to curb demand for Canadian goods and services.

Demand for higher yielding assets helped drive the NZD USD and AUD USD higher.  Australian Dollar traders are also positioning themselves for a rate hike in the near future by the Reserve Bank of Australia. The rapid rise in both of these currencies may raise concerns between their central banks as both could threaten their respective export markets.

Please do not hesitate to contact us at 1-800-971-2440, with any questions.

DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor. The value of currencies may fluctuate and investors may lose all or more than their original investments. Risks also include, but are not limited to, the potential for changing political and/or economic conditions that may substantially affect the price and/or liquidity of a currency. The impact of seasonal and geopolitical events is already factored into market prices. Prices in the underlying cash or physical markets do not necessarily move in tandem with futures and options prices. The leveraged nature of FX trading means that any market movement will have an equally proportional effect on your deposited funds and such may work against you as well as for you. In no event should the content of this correspondence be construed as an express or implied promise or guarantee from Brewer FX, LLC and Brewer Investment Group, LLC or its subsidiaries and/or affiliates that you will profit or that losses can or will be limited in any manner whatsoever. Loss-limiting strategies such as stop loss orders may not be effective because market conditions may make it impossible to execute such orders. Likewise, strategies using combinations of positions such as spread or straddle trades may be just as risky as simple long and short positions. Past results are no indication of future performance. Information contained in this correspondence is intended for informational purposes only and was obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted.