• USD/CAD +0.4%
• EUR/CAD +0.6%
• AUD/NZD +0.8%

USD/CAD

Loonie Faces Downward Momentum: Loonie weakness was seen as momentum from Friday's sell off continued on the first trading day of the new quarter.  Expecting higher growth rates in the world's ninth largest economy, traders were disappointed to see that overall growth was restrained in the month.  Even with crude oil contracts trading higher, interest rate hike potential now seems weaker than at the beginning of the year, helping along speculation that dollar rates are expected to rise at least one more time.  Subsequently, the spread or differential between the two economies is expected to widen, lending to a greenback bias environment.  Any downside for the currency pair looks limited as positive Canadian data doesn't make its way into the schedule till later in the week.  Till then, U.S. single currency based economic data looks to rock the pair for most of the week.  Next up will be releases in the U.S. in regards to mortgage applications and ISM non manufacturing data.  Overnight action should be limited with downside potential looking favorable.

Rumorville: Bidding looks to resume below current spot at 1.1695 and the 1.1700 figure.  However, given the technical resistance the spot is currently hovering seller are above the day's high at 1.1775/80 with heavier interest above at 1.1790 and the 1.1800 figure.  Stops are located slightly above at the 1.1800/05 handle.  Should buying momentum crunch through, bulls may be targeting the 1.1900 handle as a major barrier.

EUR/CAD

Manufacturing Improvement Powers Euro: In similar fashion, the euro climbed with confidence against the Canadian dollar as rates are expected to climb in the region.  Although expectations side with a stay on benchmark rates at 2.50 percent, the overriding speculation is pricing in the possibility of a rate increase in the coming months.  Futures bets are pricing in the probability of at least a move to 2.75 percent by mid summer as inflationary pressures continue to remain a concern for President Trichet and fellow central bankers.  Helping along the sentiment was today's improved manufacturing data.  Rising by the fastest pace in five and a half years, manufacturing improved to an above 50 reading, jumping to 54.5 while Germany's activity surged to a 58.1 reading versus expectations of a 56.5.  The recent data follows the recent uptrend we have been witnessing in the region, along with higher counts of consumer confidence and exports.  As a result, higher rates can be expected as price increases are probable given the sustained rate of expansion. Technically, the underlying trend may be slightly overextended as the 1.4250 resistance ceiling looks to cap the current momentum.

Rumorville: Lending to the downside looks to be euro favored offers in the major component.  Selling pressure resides at the 1.2140/45 figure with heavier interest above at the 1.2150 figure.  Increased pressure will come from the 1.2170 level with no bidding in sight till below 1.2100.

AUD/NZD

Aussie Exports Shrink Deficit: Fueling Aussie bidding on the session was a narrowed deficit for the month as a volatile surge in exports contributed to a comparable February figure.  Exports for the month soared 9.6 percent on a monthly comparison.  Narrowing to post the smallest trade deficit in three and a half years, the trade balance stood at A$595 million, down from the second largest gap on record of A$2.48 billion.  The improved figure lends optimism to an economy that has been lackluster in economic releases, prompting further speculation that central bankers will leave the rate at 5.5 percent this week.  Consumer demand has been dwindling as overall output thins.  This has led to an enormous downside in the underlying currency in the past few weeks.  However, with this prospect, bidders may now return should accompanying statements from Governor Ian McFarlane remain hawkish.  Comparatively, with New Zealand rates speculated to be reducing any time soon, Aussie remains the fave commodity denomination among the two.

Rumorville: No sized orders are placed in the market heading into the Asian session.  Notably, selling pressure looks to ensue around the 0.7185 and 0.7200 handle in the underlying major leg as profits takers enter.

Richard Lee is a Currency Strategist at FXCM.