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Euro selling against the US Dollar may be amplified in the forthcoming session with February's Euro Zone Current Account report expected to show a -18.8 billion euro decline in trading terms from a year before while the analogous US metric has been trending sharply higher.

Key Overnight Developments

• Australian Annual New Vehicle Sales Fall Most in 9 Years
• Euro Range-Bound, British Pound Lower Against US Dollar


Critical Levels

The Euro traded sideways overnight, oscillating above intraday support at 1.2986. The British Pound trended lower, slipping -0.2% against the greenback. Technical positioning favors a bearish outlook on both EURUSD and GBPUSD.


Asia Session Highlights

The economic calendar was notably tame in Asian trading hours. Australian New Motor Vehicle Sales fell for the third consecutive month to bring the annual pace of decline to -22.6% in the year to March, the biggest drop in nearly 9 years. The result reflects Australian consumers' continued hesitation to commit to big-ticket purchases amid a deepening economic downturn that has pushed the unemployment rate to a 5-year high of 5.7%, weighing on disposable incomes and prompting cautionary saving. New Zealand's consumption climate does not look much better: Credit Card Spending fell -5.0% in the year to March, the most since records began in December 1994.

The US Dollar was effectively unchanged heading into the opening bell in Europe as stock markets searched for direction in Asian trading. Financials put downward pressure on key indices on fears of disappointing earnings reports but automakers and consumer-related stocks offset losses.

Euro Session: What to Expect

February's Euro Zone Current Account report is expected to show a -10.7 billion euro deficit, a narrower shortfall than the previous month's -12.7 billion result. Setting aside month-to-month volatility, the expected result would amount to a -18.8 billion euro annual drop in trading terms as compared to a -6.5 billion decline in the year to January. Meanwhile, the analogous metric in the US has been trending sharply higher with the deficit narrowing at an annual pace of 20.5% in 2008. A widening external gap in the Euro area coupled with a contracting one across the Atlantic implies a net outflow of capital from the currency bloc and into the States, extending our medium-term expectations of EURUSD downside into the long-term outlook.

Switzerland's Trade Balance report is likely to show the surplus is likely narrow in March as exports continue to trend lower. Outbound shipments shrank -1.2% in the year to February, the most since December 2004, as deepening recession grips Switzerland's major trade partners, weighing on overseas demand. A bit of room for an upside surprise exists, however: the Swiss Franc fell -0.8% through March, which could both make Swiss goods more affordable to foreigners while making imports relatively more expensive for domestic buyers. In any case, the overall bias has favored the downside since exports snapped a 5-year uptrend in November.

To contact Ilya regarding this or other articles, please email him at ispivak at dailyfx dot com.