Dollar index extends yesterday's rise to as high as 85.50 in early US session today. Intraday bias is mildly on the upside for the moment but after all, break of 86.13 resistance is still needed to confirm underlying momentum. Overall outlook remains unchanged. As long as key support of 82 level (cluster support of 61.8% retracement of 77.69 to 89.62 at 82.24 and 38.2% retracement of 70.70 to 89.62 at 82.39, as well as long term rising trend line at 82.03) holds, the long term up trend from 70.70 is still intact. Above 86.13 will affirm this case and bring rally to retest 89.62 high. Below 84.67 will turn intraday outlook neutral again and risk another fall. Also, note that sustained break of 82 will argue that whole up trend has completed and will open up the case for deeper decline to 77.78 cluster support level.
Euro is one of the weakest currency today as the common currency drops against dollar, yen and even sterling. Eurozone GDP contracted -1.6% qoq and -1.5% yoy in 4Q08, signaling economy in the 16-nation region deteriorated more than market anticipated during the last 3 months in 2008. Leading the decline was sharp fall in exports and shrinking domestic demand while Germany, France and Italy were countries with the largest contractions during the period. ECB Provopoulos said 1 percent is not a "threshold for the ECB benchmark rate" and no decisions have been made regarding unconventional measures the bank would take.UK’s industrial production dropped -1% mom in February, better than market expectation of -1.2% and a downwardly revised -2.7% in the previous month. On annual basis, the -12.5% was inline with consensus while January’s reading was revised down to -11.6%. Looking forward, industrial production will remain in sluggish as orders from both in UK and from abroad are weak. Manufacturing production slid -0.9% mom in February, also better than consensus of -1.5% and a downwardly revised -3%. From a year-ago, the gauge was down -13.8%, compared with consensus of -14.2% and -12.9% in January.
Earlier in Asian session, RBA surprised the market by cutting cash rate by 25 bps to 3% as policymakers judged economic conditions would deteriorate more severely than previously estimated. Aussie remains steadily in range though.
BoJ left rates unchanged at 0.10% as widely expected. The bank will expand the range of eligible e assets as collateral for loans to bolster the current liquidity boosting measures. BoJ Governor Shirakawa said the Japanese economy has worsened since the central bank released its January growth forecasts. FM Yosano said the issuance of new bonds to cover stimulus package costs is inevitable.
