With the Bank of Canada set to meet tomorrow, today€™s focus was on the Canadian Dollar. The strong rally in the Canadian Dollar was spurred by higher expectations in the U.S. equity markets and firmer crude oil.
Much of the USD CAD weakness can be attributed to the unexpected news regarding the CIT Group. Late last week, investors were looking for this small business lender to file for bankruptcy protection after the U.S. government balked on a request to bail it out.
Over the weekend the CIT Group reached an agreement with bondholders to provide as much as $3 billion in emergency funding. With bankruptcy avoided for the time being, investors drove up equity prices and triggered greater demand for higher risk assets including the Canadian Dollar.
The EUR USD pushed higher today as bullish traders pushed it through the recent swing top at 1.4201. Upside momentum seems to be building for a rally to 1.4337.
The main trend is still down in the GBP USD but traders seem to think that the global economic recovery is back on track as the current price action suggests this market has the power to rally to the high for the year at 1.6743.
Downside pressure on the USD CHF has this currency pair in a position to challenge the lower end of the trading range at 1.0632. Breakdown under this level could trigger a sharp acceleration to the downside.
Stronger demand for higher yielding assets put pressure on the Japanese Yen. Now that the USD JPY has regained a 50% level at .9436, look for upside momentum to take it to the next retracement level at .9498.
Stronger global equity markets in the U.S. helped to generate a sizeable rally in the AUD USD. The expanded range and close on the high has this market in a position to challenge the recent swing top at .8155.
The NZD USD exhibited unusual strength during the New York trading session. Greater demand for higher yielding assets drove this currency pair through the last swing top at .6549 to reaffirm the uptrend. If upside momentum continues then look for a further rally to .6590.
The currency markets seem to want to rally versus the Dollar, but no one seems to want to create the volatility that is needed to drive a few of these pairs to new highs for the year.
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