Risk currencies have come under pressure overnight with mixed US data providing little in the way of inspiration to carry the upside momentum seen on Monday. In addition, China has once again been put under the microscope after February's industrial sector profit data fell 5.2 percent year to date. The Bernanke-inspired rally across risk assets seen on Monday has all but died down with market participants looking for the next major directive. Sentiment barometers such as the S&P500 swung between lethargic gains and moderate weakness with the index finishing down 0.28 percent on the day.
The US dollar remained the currency of least resistance against both its risk and safe haven counterparts. The USDJPY pair broke ¥83-figure to forge highs of ¥83.39 but has since settled into 15 pip channel around current levels of ¥83.15. After running into resistance around the 105.6 US cent levels overnight, the Australian dollar resumed a downward trajectory against the greenback sinking back below the 105-handle coinciding with weakness across US equity markets.
The EURAUD pair also continued to build on recent strength after earlier this year falling to Euro era lows. On balance, we've seen the Euro remain resilient to pressures from both sides of the Atlantic with strength from crude oil a supportive factor; however the same pressures in additional to negative conjecture about Chinese demand and local conditions have seen the Aussie dollar succumb to moderate downside. This thematic in mind, we consider a continuance of EURAUD strength a strong scenario with a technical target of 1.2950. At the time of writing EURAUD is trading at 1.2730.
With little in the way of scheduled directives in the local session, we expect the local unit to move in accordance with regional equity movements. Although we anticipate the momentum to remain against the Aussie dollar we also expect a moderation of the steep drop seen overnight with further downside to be contained at 104.2 US cents in the local session which has previously displayed supportive behavior. At the time of writing the local unit is buying 104.6 US cents.
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