Saxo Bank Mar. 12 2009 : Risk aversion support buying of USD and JPY, RBNZ cuts 50 bps and hints towards ending the easing cycle.

Yen and US Dollar strengthening as demand for 'safe haven' currencies increases as Asia equities decline. Broad gains by the US dollar against a wide range of currencies increased after Japan

Yen and US Dollar strengthening as demand for 'safe haven' currencies increases as Asia equities decline. Broad gains by the US dollar against a wide range of currencies increased after Japan GDP figures that showed Japan declining at the fastest pace since 1974. Equity markets dipped again in Asia, led by China Shanghai Iindex -2.34% and Nikkei -2.08%. Overall Japan data was definitely bearish, pushing investors to reduce risk aversion, moving into buying of the yen as well as the dollar.

The Royal Bank of New Zealand (RBNZ) also cut their overnight rate by 50 basis points down to 3.00%, pretty much in-line with market expectations, although some parties were calling for a larger cut at 75 basis points. More tellingly, remarks from RBNZ's Bollard hinted that Kiwi rates are at 'very stimulatory levels' amd that future easing will slow from now on, indicating that any cut in future will be both smaller in size and less likely. Bollard also said that he does not expect OCR rates for NZD to 'go near zero.' Very positive comments holding NZDUSD slightly higher around th 0.5120 range and could form the basis for a medium term base for NZDUSD for now.

Overnight USDJPY fell off a cliff, usually a good indication of overall rotating out of risky trades but equities managing to rally slightly. Gold held the critical $900 level (and its 50 MDA) but markets still rallied. WSJ said TALF remains bogged down by administrative wording of the contracts involved and Chinese exports fell by a record 25.7% in Feb but yet markets managed to rally. More importantly, Congress is looking at the Marked-to-Market issue and that will be in focus regarding risk aversion trades and continuing to support JPY and USD rally.

MAJOR HEADLINES – PREVIOUS SESSION

NZ RBNZ Official Cash Rate cut 50 basis points to 3.00%. Expectation was 2.75%, prior 3.50%

JP Japan Gross Domestic Product (QoQ) -3.2% vs. -3.5% expected, prior -3.3%

JP Japan Gross Domestic Product Annualized at -12.1% vs -13.4% expected, prior -12.7%

AU Australia Unemployment Rate at 5.2% vs. 5.0% expected. Prior reading was 4.8%.

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THEMES TO WATCH – UPCOMING SESSION

Europe - CPI figures coming out in Europe later

US Advance Retail Sales(US)

US Initial Jobless Claims - expected at 514K, prior 5106K

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Note: the support/resistance levels used in the matrix’s of this document are levels derived from yesterday high, low and close. Reference in the text to other support/resistance levels will occur.

EURUSD
Resist.
1.3268
1.3020
1.2928
1.2843
1.2679
1.2523
1.2275
Support
Quoted: 12 Mar 09 05:48 GMT

GBPUSD
Resist.
1.4279
1.4042
1.3957
1.3878
1.3720
1.3568
1.3331
Support
Quoted: 12 Mar 09 05:48 GMT

USDJPY
Resist.
101.38
99.55
98.41
96.32
96.57
95.88
94.04
Support
Quoted: 12 Mar 09 05:48 GMT

EURJPY
Resist.
128.32
126.58
125.71
123.72
123.97
123.10
121.36
Support
Quoted: 12 Mar 09 05:48 GMT

USDCAD
Resist.
1.3141
1.2988
1.2918
1.2876
1.2765
1.2681
1.2528
Support
Quoted: 12 Mar 09 05:47 GMT

USDCHF
Resist.
1.1890
1.1733
1.1631
1.1526
1.1474
1.1419
1.1262
Support
Quoted: 12 Mar 09 05:48 GMT

AUDUSD
Resist.
0.6738
0.6610
0.6565
0.6484
0.6437
0.6354
0.6226
Support
Quoted: 12 Mar 09 05:48 GMT

NZDUSD
Resist.
0.5406
0.5244
0.5188
0.5132
0.5026
0.4920
0.4758
Support