The greenback edged up higher against the majors amid heightened risk aversion, pushing the euro beneath the 1.28-level. Data from the US pointed toward further deterioration in fundamentals, suggesting the recession continues to worsen.

US economic reports released earlier revealed a sharp contraction in GDP growth, down by an annualized 3.8% in Q4 versus a 0.5% decline previously. Although the drop in GDP was less than the anticipated drop of 5.4%, it was still the steepest contraction in the US economy since 1982. The Q4 sales component of GDP declined by 5.1% versus a 1.3% decline previously, while PCE price index posted a 5.5% drop versus a 5% decline. The Q4 employment costs eased to 0.5% from 0.7%. The January Chicago PMI declined to 33.3 from 35.1 in December, while the University of Michigan consumer sentiment survey improved to 61.2 in January, up from 60.1.

Euro Remains under Pressure

The single currency continued to slump against the greenback, dipping beneath the 1.28-handle as economic fundamentals in the Eurozone remain soft. The December unemployment rate jumped higher to 8.0%, outpacing estimates for an increase to 7.9% from 7.8%. Eurozone flash inflation in January eased to 1.1%, a larger than expected decline from 1.6% a month earlier.

EURUSD holds steady near the 1.28-handle with support seen at 1.2760, followed by 1.2730 and 1.27. Subsequent floors will emerge at 1.2670, backed by 1.2640 and 1.26. On the upside, gains will target interim resistance at 1.2830, backed by 1.2865 and 1.29. Additional ceilings are eyed at 1.2940, followed by 1.2970 and 1.30.