Risk takers drove the Euro higher on Tuesday. Traders for the most part decided to ignore the bearish U.S. housing report today and decided instead to focus on the possibility of the start of a global economic recovery.

The chart pattern suggests that the Euro will make a run at last week's high at 1.3719. Taking out this price will reaffirm the uptrend and create a new main swing bottom at 1.3420.

It��s hard to believe that this market has so much buying power behind it after last week's selloff following the release of a report showing a huge contraction in the Euro Zone economy. Even in the face of bearish fundamentals, the Euro remains strong. This is causing problems with most fundamental analysts at this time. The best way to trade is to follow the trend and stay away from trying to rationalize the rally.

Under normal circumstances news that the U.K. inflation rate dropped to a 15-month low in April would have triggered a selloff in the British Pound, however, traders chose to ignore this report today and instead decided to focus on the long side because of strength in the global stock markets - in particular the financial sector stocks.

Last week when traders preferred less risky assets, the British Pound felt downside pressure after Bank of England Governor Mervyn King said the economy would continue to remain sluggish and that the U.K. economic recovery would be labored.

This week, traders have chosen to follow the lead of the equity markets and support the British Pound. Some traders are buying the Pound because of the strength in the banking sector. This comes as no surprise since the U.K. economy derives a substantial amount of its revenue from the financial sector.

Overnight the British Pound made a new high for the year despite a dismal outlook for the economy. Continue to trade the long side as long as the trend remains up and trader demand for more risky assets continues to grow. The main trend is decisively higher but this market still remains vulnerable to breaks especially since investors can turn pessimistic quickly.

Higher crude oil and equity markets helped drive the Canadian Dollar to within striking distance of a new high for the year at .8717. The chart indicates the main trend is up with a new higher bottom formed at .8465. A trade through this price will turn the main trend to down. The best suggestion is to continue to trade the trend and stay away from trying to forecast a top. Trader appetite for risk is strong, and cash is leaving the low-yielding U.S. Dollar to seek a better return elsewhere.

Aggressive traders have to be aware of the possibility of action by the Bank of Canada to weaken its currency. The rise in the Canadian Dollar may hit a level soon where it has a negative effect on demand for Canadian exports. This weakening action may come in the form of quantitative easing.

The key to understanding which direction this market wants to take will be determined by how it reacts following a test of the high for the year at .8717.

Despite turning the main trend to up on the daily chart two days ago, the Japanese Yen is feeling downside pressure for a second consecutive day. This is being triggered by increased demand for more risky assets. Aggressive investors have been borrowing the Japanese Yen and selling the U.S. Dollar in a revival of carry trade activity.

Based on the short-term range of 1.0025 to 1.0580 look for bullish traders to try to establish support at 1.0303 to 1.0237. If buyers do not step in at this zone then at least expect the break to become labored.

Weakness in the equity markets could also drive this market higher if trader demand for risk begins to wane. Gains may be limited to the upside as the Bank of Japan feels that excessive volatility could have a negative effect on demand for Japanese exports.

The Swiss Franc posted a strong close versus the U.S. Dollar on Tuesday as Swiss investors repatriated in an effort to capture higher yielding assets elsewhere. Strong demand for higher yields encouraged traders to leave the safety of the Dollar.

Technically, the Swiss Franc is still in a position to top out given the current chart formation. The best sign of a top will be a failed rally inside the .8995 to .9022 range.

Traders for the most part have been ignoring the bearish outlook for the global economy at this time. The current increase in demand for higher risk assets is all speculation which means that this market could fall much faster than it has gone up.

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