* The dollar fell on Tuesday, pressured by a report that oil producing nations along with Japan, France and China were discussing replacing the USD with a basket of currencies and gold to price oil transactions. The report, although denied by the parties, pressured the greenback in this dollar skeptical environment. The USD was further pressured by Australia’s unexpected interest-rate hike, which increased risk appetite and rallied stocks and commodities. The dollar index, approaching a cycle low, is testing the 76-handle support. Gold rose to an all-time high. The S&P 500 index was up 14.26 points to 1,054.72. The yen advanced, supported by a statement by Finance Minister Hirohisa Fujii that countries should not engage in competitive devaluation. The euro gained against the greenback and pound. An unexpected decline in UK industrial production pressured sterling. The Australian dollar rallied to a 13-month high on the RBA rate hike and commodity rally.
* The USD/CAD fell on higher commodity prices and bearish greenback sentiment. The pair’s direction is continuing to be inversely related with equity and commodity prices. After failing to penetrate the diagonal resistance last week, the USD/CAD is now testing support in the 1.05-1.06 area. The Bank of Canada may be tempted to intervene to support the pair if the USD/CAD decline continues. Our long position stopped out today.
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