The safe haven currencies continue to benefit from further declines in the US stock market, with the dollar and the yen edging higher across the board. The equity market will likely continue to dictate direction as traders closely scrutinize corporate earnings reports in the coming weeks to gauge the impact of the recession on US corporations. The major equity bourses further relinquished recent gains, as the Dow Jones and Nasdaq were both lower by over 2% while the S&P 500 slumped by 1.9% in the afternoon session.
RBA Cuts Benchmark Lending Rate
The Aussie remained within range against the greenback following a 25-basis point rate cut by the Reserve Bank of Australia to its lowest level in nearly half a century to 3.0%. In the accompanying statement however, the Bank provided few details as to whether additional policy easing can be expected over the coming months. The RBA continued to acknowledge that Australia's economy is contracting, with capacity utilization falling from its peak, demand for labor declining and expectations for growth in labor costs seen further easing. Lastly, the Bank tempered the outlook for additional rate cuts, stating the current stance of monetary policy will provide significant support to domestic demand over the period ahead.
AUDUSD continues to shy away from its 3-month highs reached last Friday at 0.7228, hovering near the 0.7150-region in New York trading. Interim resistance is seen at 0.72, followed by 0.7230 and 0.7267 - the pair's January high. Subsequent ceilings will emerge at 0.73, backed by 0.7350 and 0.7410 - the 200-day moving average. On the downside, support starts 0.7120 followed by 0.71 and 0.7045. Additional floors will emerge at 0.70, backed by 0.6965 and 0.6920.
The euro extended losses, dipping beneath the 1.33-level against the dollar to 1.3226. Data released overnight revealed worst than expected Eurozone Q4 GDP, with the revised quarterly growth rate posting a 1.6% contraction compared with a 0.2% contraction previously while the annualized growth rate declined by 1.5%, reversing a prior reading of an increase of 0.6%.
In the coming session, the calendar consists of Germany's February trade balance and industrial orders.
EURUSD holds steady near 1.3270 with support starting at .13250, followed by 1.3220 and 1.32. Subsequent floors are eyed at 1.3160, followed by 1.3130 and 1.31. Gains will target resistance at 1.33, followed by 1.3340 and 1.3375. Additional resistance will emerge at 1.34, backed by 1.3430 and 1.3465.