Dollar Fell on Housing Concerns

The dollar lost its ground when the liquidity returned back to normal on Tuesday. The euro climbed back to above 1.34 handle versus the dollar and marched higher towards 1.3450.

Concerns on housing market and a trade dispute between US and China weigh on the dollar today. The shares of American Home Mortgage Investment Corp. declined sharply after it lowered earnings forecast, raising worries about cool down of the housing sector. US formally complained to the WTO over China's piracy and blocking access to US films, books and software.

The European Central Bank will hold monetary policy meeting on Thursday. Though it is more likely to raise rates next month instead of this time, the ECB chairman Trichet's comments may be hawkish to set stage for a rate increase soon.

Wednesday will focus on the FOMC interest rate decision. The Fed is widely expected to keep interest rates at 5.25%.

EURUSD will face interim resistance at 1.3450, followed by 1.3480 and 1.35. Additional ceilings will emerge at 1.3520, backed by 1.3550. Support starts at 1.34, backed by 1.3380, 1.3350 and 1.3320. Subsequent floors are eyed at 1.33.

GBPUSD encounters interim resistance at 1.9730, backed by 1.9750, and 1.9780. Subsequent ceilings will emerge at 1.98, followed by 1.9830 and 1.9850. On the downside, support begins at 1.97, followed by 1.9670 and 1.9650. Additional floors are eyed at 1.9630, backed by 1.96 and 1.9550.

Commodity Currencies Gain on Rising Metal Prices

Commodities currencies, such as the Aussie, loonie and kiwi, rallied as base metal prices rose. Gold was also up more than $6 today to $678. The Australian dollar climbed to 0.8259 versus the dollar, the highest since 1990. The Kiwi gained more than 1 percent to reach a 2 year high at 0.7305 against the dollar. The Canadian dollar strengthened to 1.1460, close to a major support at 1.1450.

Yen Remains Weak Before BOJ