Forex news for January 21, 2015:

The theme as New York traders returned from a long weekend was US dollar buying. The euro, yen and commodity currencies all suffered as the dollar drove higher. There wasn’t any particular catalyst for US dollar strength but many cited the IMF boosting the US outlook while cutting the rest of the world in their latest forecasts.

USD/JPY was a standout performer as the rally that started in Asia continued right around the clock. Some selling hit into the London fix to drive the pair to 118.25 but the bidders returned afterwards and narrowly took out the European high and up to 118.80. So far the 61.8% retracement of the Jan decline at 118.88 is capping the topside.

EUR/USD was back under pressure with the clock ticking down to the ECB decision. We’re almost at the point now where all bets should be placed so it could start to get whippy from here. If there were thoughts about profit taking on shorts ahead of the decision, there are no signs of it yet. The downside has stabilized near 1.1553 and bids at 1.1540 have held so far.

The pound was unusually strong even in the face of a US dollar rally. A factor might have been M&A flows, although the rumored values probably weren’t enough to make much of a dent. late in the day, some of the strength faded after an unsuccessful test of 1.520. Last at 1.5140.

USD/CAD fell yesterday for no particularly reason. There were three reasons for the the 160 pip rally today aside from the retracement of yesterday’s 60-pip fall. 1) Oil fell 5% 2) The focus on the BOC sharpened 3) soft manufacturing sales. It was a fresh 5 year high above 1.21 and there isn’t much resistance anywhere.