Dollar Falls On Renewed Risk Appetite

Asia Pacific markets were stronger today after the Fed announced yesterday that it will maintain record low rates for an "extended period of time." The language of the FOMC press release suggests that economic conditions have continued to improve with increases in household spending as well as signs of stabilization in the labor markets. US markets rallied on the news lifting the Dow some 43 points to close at 10685.98. Announcements from the BoJ also set the tone for a rally in Asian market as the central bank left interest rates unchanged. The greenback came under pressure as risk appetite steered investors towards riskier, higher yielding assets.

Euro Advances

The euro advanced against the dollar on the Fed's announcement, testing the 1.3780 resistance level yet again. The single currency was supported by reports that debt-stricken Greece will maintain its current BBB+ credit rating. Past the 1.3780 level, price ceilings emerge at 1.3850 and at the 161.8% Fibonacci extension taken from the Dec 22nd and Mar 2nd troughs at 1.3980. A break here could signal a reversal of the bearish euro trend. Downside risk strengthens with a break beneath 1.3640, with additional support seen at 1.3530 and the 1.35 handle.

BoJ Battles Deflation

In an attempt to combat deflation, the BoJ held interest rates near zero and announced additional monetary easing measures today. The central bank doubled the bank lending facility introduced in Dec to 20 trillion yen ($222 billion) in response to government fears that yen appreciation could put a strain on the export-based recovery. In a knee-jerk reaction, the yen jumped to the figure before relinquishing its gains, settling just above the weekly pivot at 90.40. Past 90.70, the dollar still faces strong resistance at the 91 figure, which rests at the convergence of the 61.8% Fibonacci extension taken from the Feb 4th and March 4th troughs, and the upper bound of the downward channel dating back to Jan 8th. Additional price ceiling are seen at 91.30 and at the 200-day moving average at 91.70. Interim support sits at the 90 handle followed by 89.70 and 89.40. Downside risk increases with a break below 88.50.

Cable Soars

The sterling surged 1.8% off the day's lows at 1.4980 yesterday on dollar weakness. The cable is positioned just below the 61.8% Fibonacci extension taken from the Jan 19th and Feb 17th crests at 1.5240. A break above the monthly pivot at 1.5280 puts the pound back into the downward channel that dates back to the Nov 3rd lows. Resistance is eyed at 1.5380 followed by 1.5410 and the 1.55 handle. Downside potential gains momentum with fall beneath 1.5010 with demand resting at 1.4940 backed by 1.4850.

Aussie Strengthens

The aussie broke through key resistance at .9170 as dollar weakness and rising commodity prices boosted the currency to the .92 handle pre market open in London. Gold prices soared more than 3% in the last 2 sessions while oil prices popped up more than 4% to $82.40. Past the figure, resistance levels emerge at .9230 followed by .9320 and the .94 handle. To the downside, support rests at .9120 backed by .9080 and .9010.

Today, data from the UK is expected to show a modest decrease in the claimant count while the ILO unemployment rate is seen to inch up to 7.9% from 7.8%. At 8:30 in New York, wholesale sales from Canada and PPI from the US are both expected to fall. Momentum from the US and Asian markets has European markets in the green, with US equity futures also pointing to a stronger open.