The EUR began the overnight trading session on a firm basis after Italy’s new Prime MInister Letta won his first confidence vote in the lower house by a vote of 453 to 153. The new government is finding backing not only from Letta’s center-left Democratic Party, but also from Berlusconi’s center-right People of Freedom party and by former Prime Minister Monti. Letta is expected to win another vote on Tuesday in Italy’s senate. The EUR tested resistance overnight at the 1.3120 level. The EUR rally however was short-lived as the single currency moved towards the support level of 1.3075 after Spain announced their economic activity contracted 2.0% in the first quarter, which is where analysts expected the number to be and a little lower than the previous contraction of 1.8%. German unemployment improved to 4,000 in April from 13,000 in March. The German jobless rate remained unchanged at 6.9% in March. The EUR is currently trading in the 1.3070-80 area as traders begin to focus on the ECB meeting on Thursday. Consensus is that the central bank will cut rates 25 bps to 0.50%. There has also been some talk that the ECB may finally follow the lead of the other central banks, (FED, BOE, BOJ) and consider some sort of quantitative easing. The FOMC begins their two day meeting today and they are expected to keep policy unchanged. The market will be much more interested in the accompanying statement to see how the FED reacts to the less than stellar economic data that has been released lately. No surprises are expected from the FED and traders will quickly turn their focus from the two central bank meetings to the ISM and non-farm payroll releases due in the US later in the week. In other currency news, the Canadian Dollar remains firm as crude oil stays firm. Crude Oil is Canada’s largest export. The “loonie” is also benefitting from speculation that the US FOMC meeting will maintain their stimulus package and the ECB will lower rates. The USD/CAD briefly breached the support level of 1.0110 overnight before bouncing back into the “teens” for most of the trading session. Adding to the Canadian strength, Canadian GDP grew 0.2% in February, equaling the previous month, as opposed to the US GDP release last week that showed the US economy growing only 2.5% as opposed to the estimated 3.0% level economists had forecasted. Analysts point towards Canada as an alternative to the US in North America for investors and expect that to continue especially if the ECB lower rates which also gives Canada a rate advantage over other currencies. Support for USD/CAD remains at the 1.0100-10 area. A break there could see a quick move towards 1.0080. Resistance remains at 1.0150. In the US, the US treasury expects to pay down debt in the second quarter of 2013 as the budget deficit has began to shrink. This will be the first net debt repayment since 2007. Tax revenues and a “squeeze” on spending have contributed to this. Look for traders to begin positioning themselves today ahead of the FED and ECB announcements. Lately the EUR seems to fall the day before the meeting, then retrace before the ECB announcement. Given the fact that the FED makes an unusual appearance ahead of ECB announcement could make for volatile trading the next few sessions. Further reading: Turning the yen around Matthew Lifson Matthew Lifson Matthew Lifson is a Foreign Exchange Trader and a Market Analyst. with Cambridge Mercantile Group. View All Post By Matthew Lifson Forex News Today: Daily Trading News share Read Next Big fall in euro-zone inflation adds pressure for a rate Yohay Elam 9 years The EUR began the overnight trading session on a firm basis after Italy's new Prime MInister Letta won his first confidence vote in the lower house by a vote of 453 to 153. The new government is finding backing not only from Letta's center-left Democratic Party, but also from Berlusconi's center-right People of Freedom party and by former Prime Minister Monti. Letta is expected to win another vote on Tuesday in Italy's senate. The EUR tested resistance overnight at the 1.3120 level. 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