North American markets got a big boost from news that BHP Biliton had proposed a $37 billion takeover of Potash Corp. The takeover suggests corporations are willing to invest and spend, something that has been up for debate. Companies have been hoarding cash, unwilling to hire or invest due to the uncertain economic environment. If the move by BHP is the start of a trend, it will signal growing corporate confidence in the worldwide economy – something that will boost AUD and CAD.

There is a downside bias as USD/CAD consolidates in a wedge formation. A drop below minor support at 1.0305 would point to further losses for the U.S. dollar against its Canadian counterpart.

For the Australian dollar, the candlestick patterns are bullish in the short-term but a buy signal won’t be confirmed until 0.9081 is breached. With Asian markets risk averse at the moment, there may be good value in establishing longs if AUD/USD drifts toward 0.9000.

First, we would like to update yesterday’s post. We noted that USD/JPY was gearing up for a big move and that is exactly what happened. We were cautious on the early move (especially since we had a slight bias to the downside) but once the news that Japan’s Prime Minister quitting hit, we knew which way this pair was heading. His replacement will likely be Fiannce Minister Naoto Kan, who has been quoted as saying he prefers a weaker yen. It seems as though the technicals and fundamentals are aligning for this trade. A strong U.S. non-farm payrolls report on Friday will likely lead to another leg higher.

The U.S. dollar has been strong today but it has been badly outpaced by it’s northern neighbour as Canada’s loonie has led the forex market. If we get a daily close below 1.0414 we see it as a bearish signal.

The Bank of Canada hiked interest rates on Tuesday but didn’t commit to further rate hikes and we saw a disappointment trade combined with a risk averse environment that left a negative technical picture. We were thinking about entering longs but today’s impressive rally in CAD has taken us aback.

We are now back below the key 200-day moving average. The pair is about to hit some significant technical support at the 100dma (1.0330) followed by trendline support and the old range bottom of 1.0205.

Still, we find it very hard to be long USD/CAD after today’s price action. We caution against agressive shorts because today’s move seems so out of the ordinary. A close above 1.0414 and we might wade into a long position with a very tight stop. If we close below that level we start looking for ways to short the pair.

What a market we are experiencing today!!!  It spells money!!!

As we can see from the trading day yesterday the oil continued its movement in the direction of an uptrend reaching the price of $75.38 a barrel. This was a 10 month high for oil after the amazing summer of 2008 when oil reached $140 a barrel.  This direction continues to support the weakening of the USD, while supporting the CAD and AUD, the commodity driven currencies.

When will this trend stop??

Maybe a few traders have an idea when this will end, however when we look at technical analysis we continue to clearly see the trend.  The announcements we mentioned above coming from the US have already been published and both were positive for the USD. Will we see a market correction or will the trend continue? Question left unanswered will be answered by the traders during the end of the London session and into the US session. Make sure to always examine your support and resistance lines before entering your trades.

Let’s take a closer look at a few pairs:

USD/CAD

I’m not going to talk about the oil, but we can talk about this pair and how it is affected by the oil.  We can find that yesterday this pair made more moves supporting the price of oil, leading to a stronger CAD. Here are the Support and resistance lines for this pair today.

GBP/USD

Employment data in the UK today showed that the country lost 20.8K jobs, less than the 24.5K expected, helping the cable gain a bit against the buck. The gain put it above the 1.6000 level temporarily, though it has come off a little since then going back to the range it was trading in during the last few trading days.

Fundamentals:  We have a few announcements today that will affect the market.

Coming from US we have the “Core CPI M/M”.  The previous announcement was 0.1% and the forecast for today is 0.1%. Released at (12:30 GMT).

One more announcement coming from the US  “Unemployment Claims” which will be released at  12:30 GMT, the previous announcement was 521K and the forecast for today is 524K.

Yes, Barack Obama winning the Nobel Peace Prize was the highlight of the weekend, but let’s be honest the Dollar isn’t on the same position as Mr. Obama in terms of popularity. Lets look over the last few weeks and we will find something even more interesting then the Nobel peace prize in terms of a trend.

It keeps on being positive for us as forex traders, the trends are clearly there.  Over the last few months we will see a very clear trend on most of the currencies traded in the Forex market, especially the majors. We can also see the same trend applying to the commodities.

What continues to push the commodities in the market forward appears to be the weaker dollar. So know the Nobel peace prize doesn’t look so relevant for the dollar and we will need to wait and see what will be the upcoming announcement for the US economy this week and the effect they have on the USD. So lets break it down and see how it will affect the Forex market.

This week, I am sure we will get some more movement and excitement from the market!!  However we are starting the week with Monday which happens to have 2 of the 3 largest markets closed because of a holiday. The US, CAD and JPY are all closed because of the holiday. When the biggest session is closed the market is expected to be quite and not a lot movement is expected.

Fundamentals:  We have a few announcements today that will affect the market.

Coming from New Zealand we have the “Retail Sales M/M”.  The previous announcement was -0.5%and the forecast for today is 0.6%. Released at (21:45 GMT).

One more “Core Retail Sales M/M” which will be released at  21:45 GMT, the previous announcement was -0.5% and the forecast for today is 0.5%.we have a Bank Holiday in Japan, US, and Canada so will not expected to see a strong activity from there.