Forex - RBNZ cut rates by 50bps to 3% - SNB rate decision later today

Forex News and Events:

Overnight, price action was incredibly choppy, but the bias was toward USD weakness. A less than feared, RBNZ rate cut by 50bps to 3%) and took NZD higher, setting the early tone for the G10, while sharp selloff in USD/JPY also kept the pressure on USD and Cross/JPY. The yen climbed to 122.87 versus the euro as of 7:41 a.m. in London from 124.86 late yesterday in New York. The dollar rose to $1.2780 per euro from $1.2837. The yen advanced to 96.22 per dollar from 97.27. Japan’s currency gained 2.6 percent to 62.08 against the Australian dollar and rose 1.6 percent to 49.16 versus the New Zealand dollar. Oil dropped 7% following release of the EIA report which showed a 700k barrel rise in crude stocks last week although the price has stabilized somewhat remaining above $42 pbl The Central Bank of Brazil cut interest rates by 150bp to 11.25%. This, despite the higher inflation figure seen yesterday. The central bank decided to do this aggressive rate cut to prevent the economy from sliding into a recession. These moves stalled as S&P equity futures languished in the red (-0.7%). The main data/event highlights in the London session will be the SNB rate announcement (see USD/CHF), a speech by ECB President Trichet, and the BOE’s Q1 Inflation Attitudes Survey. In the US, the main highlight is Feb retail sales. We expect the SNB to roll the top of the current LIBOR target band (0-1%) down to 0.5% in what will be effectively the last conventional policy move in the current cycle. There is a risk that the SNB discusses the options for unconventional policy, including unsterilized FX intervention. Should the SNB refrain from strongly worded threats of intervention, USD/CHF could collapse to 1.13 and EUR/CHF could surge toward 1.4990.

Today's Key Issues (time in GMT):

12:30 USD Advance Retail Sales (FEB)
12:30 USD Retail Sales Less Autos (FEB)
13:00 CHF Swiss National Bank Rate decision
14:00 USD USD Geithner Testifies to Senate Budget Committee on 2010 Budget

The Risk Today:

EurUsd is again attempting to reverse on the upside, closing above the 20-day moving average and breaking a resistance line (now at 1.2750). The currency pair is still encountering resistance as it approaches 1.2900. Above that level, further advance is expected towards 1.2990.

GbpUsd is finding support on a descending support line and is expected to rebound towards 1.3965 before 1.4040. Support is at 1.3805. For today this currency pair should be between 1.3805 and 1.3960 before a probable rebound to 1.4040.

UsdJpy after the rise and the consolidation seen of the pas few weeks, the USDJPY is attempting a correction. This currency pair is seen between 95.95 and 97. Below that level, further downside pressure might push the currency towards 94.95.

UsdChf is doing a slight downside correction as it approaches 1.1460. For now, the currency is range trading, with a resistance at 1.1570. For today, we see the USDCHD between 1.1495 and 1.1570, before a return towards 1.1460. Target is still at 1.1400, before 1.1315.

Resistance and Support: