I hope many of you were able to take a nice profit on my short USD/CAD recommendation today. It came down and hit the one support level I failed to mention yesterday at 1.0130. The bad news is I forget to  list every support level, the good news is there will soon be a whole technical analysis page or pages created on the site which will list all the support levels for you.  GBP/USD ran into a wall today when it hit the 50% Fibonacci retracement on the move from $1.93 to $2.04. at $1.9898 and looks like it wants to head back down to the Fibonacci at $1.9782 sometime tomorrow morning but I must warn you that if you try to jump in now and ride it down it is wise to get out BEFORE the big ISM report tomorrow.

Well Bernake did indeed do his worst, trying to talk down the dollar in his testimony today in Congress. It is no secret that the Fed has a weak dollar policy and that they are setting the policy not the Treasury Department. Even so the Dollar showed some moxie and continued to make headway in the New York session against many pairs. The ADP employment report which has garnered more attention and respect now that it has been around a few years showed an increase in jobs last month and this surprised many.  Even so the dollar lost ground against the euro and the Canadian dollar today. The larger move overall has been related to the carry trade pairs and this is also effecting USD/JPY and USD/CHF because of the sudden lack of demand for these two pairs. I would call this correction in the carry trade pairs like GBP/JPY healthy and that pair went all the way down t0 192 after being at 250 last summer. So really a 11 cent bounce is really not large in comparison. Anyways the carry pairs have calmed down for the evening but expect more volatility in the near future with them. Tomorrow’s big news with be the US non manufacturing report which is really important in this service based economy that our politicians and corporate leaders are trying to convince us is so good for us. A poor reading on it could really stymie dollar’s attempt to recover.  There was no surprise that Bernake would try to talk down the dollar, every trader worth his salt knew that. The economic data release is a much harder thing to predict. If it comes out weak like it is expected too you can also expect the dollar to be weak. I would recommend a wait and see approach here.

Although the yen did strengthen right after I suggested to buy it against the dollar yesterday by about 50 points it clearly broke 100 yen to the dollar later on. The stock market rally is really helping the dollar against the yen because of the strong correlation there. The dollar is looking good here but I suspect that Bernake will talk it down tomorrow morning and it will lose value during the am hours of the New York session. I think USD/CAD looks like a good short here, this pair has once again lead the market in terms of dollar direction and I think tomorrow it will lead the dollar in a downward move. It really sold hard at 1.03 indicating a lot of orders placed at the figure. 1.0192 seems to be the likely target since it is the 61.8% Fibonacci retracement on teh big move from 1.18 down to the low 90s. IF this is breached look at 1.0175 as the next support level followed by 1.01.

The downward movement I was expecting was confirmed today on EUR/USD and USD/CHF followed suit. The double top looks like it will hold and the euro will back off here. That is of course unless the Fed does something dumb like they did last time the dollar tried to rally and kill the recovery. The yen did gain last night but gave it all back and then some as the dollar strengthened across the board. So I guess the April fools were the ones who were still short dollar on the first. Gold made a clear break of $900 and GBP/USD is once again finding resistance at $1.8782 after a sharp correction. Even if we see a weak jobs report this week I am starting to think it would set up a triple top in EUR/USD. Of course Bernake is speaking tomorrow morning and when he moves his lips the dollar tends to fall so be prepared to see the dollar give back some of it’s gains tomorrow morning.