The EUR/USD closed slightly higher in a volatile trading day on Tuesday. Early session action had the Euro trading mixed as Euro Zone Retail trading came out better than expected, but a purchasing managers report was weaker. A sell-off in European stocks triggered some short covering, but a U.S. manufacturing report showed activity expanded unexpectedly, making the Dollar stronger.

The next two days should see the market focused on the July 3 ECB meeting and the U.S. employment report. Traders expect the ECB to raise rates to 4.25 percent, and the U.S. non-farm payroll report is forecasted to show that the U.S. lost about 60,000 jobs, the sixth month in a row with losses.

News was the main trigger for the volatility on Tuesday, but the market traded within technical levels. Monday's reversal top at 1.5836 remained intact. A follow through to the downside is needed to trigger more selling pressure. The first downside target of this break is 1.5569. If 1.5836 is violated, the charts indicate a move to the all-time high at 1.6019 is likely over the near term.

The USD/JPY traded mixed on Tuesday while following the violent swings of the U.S. stock market. Traders have been putting money back into the Yen as the stock market has traded sharply lower the past ten days. Oversold conditions in the stock market, however, make the USD/JPY vulnerable to a short-covering rally. Technically, the USD/JPY is finding support at 105.36. Based on Monday's low, the short-term range is 104.99 to 108.42. A rally today in the stock market could trigger a short-covering rally to 106.71 before new sellers come in.

The GBP/USD continued its strong rally. Fundamentally, the weak and unclear statement by the FOMC regarding future interest rate hikes combined with the Bank of England's Governor Mervyn King’s comment, stating, Although inflation is rising now, we will ensure that it falls back to the 2 percent target, is the driving force behind this rally. Traders are interpreting this statement as an indication that the BOE would raise rates in the near future if necessary. With the Fed sitting on its hands, the Pound is the more attractive currency at this time. The charts indicate the next upside target is 2.0013 to 2.0027. Key support at 1.9900 has to hold or the market could fall back to 1.9684. With this pair approaching the resistance zone and technically overbought, do not be surprised by a reversal top formation today to signal profit taking.

The USD/CHF confirmed the reversal bottom off the major retracement price at 1.0130. The lack of follow through to the upside, however, was caused by the selloff in the stock market. A recovery in the stock market may trigger a strong short-covering rally. Based on the short-term range of 1.0541 to 1.0129, look for a possible rally to 1.0335 – 1.0384 before hitting resistance. A break through 1.0129 could trigger a significant sell off.

The USD/CAD rallied as Canadian traders continue to express concerns over the high price of oil stifling the Canadian economy. Traders are beginning to feel that the Canadian economy may slow down as consumers cut spending due to rising gasoline prices. In addition, the weak U.S. economy and a risky financial sector are making traders think twice about getting overly bullish in the Canadian Dollar since each economy is so closely related. The short-term range is .9818 to 1.0321. This makes 1.0070 to 1.0010 an important support area. The strong close on Tuesday could trigger a rally which tests the double top at 1.0321 and 1.0324.

The AUD/USD followed through to the downside after posting a new 25-year high on Monday. A report is circulating that higher energy and food costs may be hurting the growth in the economy. The Australian central bank is indicating a slowdown in consumer spending. It is also warning that expansion may be slowing down. Based on the range of .9326 to .9668, look for a retracement to .9497 - .9457 before new buying surfaces.

The NZD/USD is expected to feel spillover selling from the Australian Dollar. With the economy already in a contraction, news that higher energy and food prices may hurt further growth is painting a bearish picture. The short-term range is .7445 to .7664. This sets up a possible retracement to .7555 - .7529. Look for selling pressure until this zone is reached. The fundamentals would have to change to positive in conjunction with a breakout over .7664 to turn this market around.

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