Even before the U.S. Forex trading session started there were signs that today would be an unusual day as stories were circulating that CIT Group would file bankruptcy following the news that the U.S. government would not provide assistance to them. This triggered an almost immediate flight-to-safety rally as traders flocked to the U.S. Dollar and Japanese Yen for safe-haven protection.

Later in the morning session but prior to the New York opening JP Morgan Chase announced better than expected earnings. This news froze the markets as it created a desire for risky investments but traders were still worried about the CIT news.

Throughout the trading session, upside momentum began to build when finally the equities markets took off to the upside triggering a break in the U.S. Dollar. The Japanese Yen which had been trading higher most of the day reversed to the downside as investors once again sold in an effort to draw a better yield.

Higher-yielding currencies such as the New Zealand and Australian Dollars also posted gains as traders chased these markets higher into key retracement zones. Retaking these technical levels would be strong signs that these currency pairs will test new highs for the year fairly soon.

In economic news, the U.S. Initial Claims report showed that more jobs were lost. This helped weaken the Dollar as traders looked toward the British Pound and Euro for better appreciation. Both of these markets are also at or approaching key retracement levels that will dictate the direction over the next few weeks.

Despite a rebound in crude oil prices, the Canadian Dollar was unable to overcome technical resistance and traded flat to lower into the close.

Looking at the chart patterns, it appears that the clash over the next few days will be between the fundamental and the technical traders. Both types of traders can build both bullish and bearish cases. On the bullish side, the desire for better returns driven by better than expected U.S. earnings reports is helping to support the current rally. Bearish technical traders cite the fact that the major currencies are merely making retracements of their two year ranges and not new highs for the year as the reason why they are vulnerable to a correction from current levels.

Unless there is earth-shattering fundamental news, continue to look for the major Forex pairs to remain range bound. Some traders remain skeptical about the global economy and may not be willing to chase these markets at current levels. If buying dips is the preferred trading strategy then look for another short-covering rally in the Dollar to develop over the short-run.