Risk Aversion Benefits USD & JPY

The dollar and the yen advanced at the start of the week amid increased risk aversion from a bailout proposal of the US auto industry. The equity bourses tumbled, with the Dow Jones and S&P 500 both plunging by over 3%, while the Nasdaq dipped by 2.8%.

Euro Recovers above 1.32

The euro edged back above the 1.32-level in the early Asian session, rebounding from Monday's lows against the dollar to above the 1.3250-level. Traders will focus on the ECB monetary policy decision later in the week. Markets are expecting the European Central Bank to cut rates aggressively, slashing the benchmark interest rate by 50-basis points to 1%. The subsequent press conference by Bank President Trichet will also be closely scrutinized for hints of whether additional policy easing can be anticipated over the coming quarters.

EURUSD holds steady above the 1.3230-level, with interim resistance eyed at 1.3250, followed by 1.3270 and 1.33. Subsequent ceilings are seen at 1.3340, backed by 1.3365 and 1.34. On the downside, support begins at 1.32, followed by 1.3160 and 1.3130. Additional floors will emerge at 1.31, backed 1.3050 and 1.30.

Japan Unemployment at 3-year high

Japan's February unemployment rate climbed up to its highest level December 2005 at 4.4%, slightly higher than consensus estimates for an increase to 4.3% from 4.1% in January. The jobs-to-applicants ratio deteriorated by more than expected, falling to 0.59 in February from 0.67 in the previous month. Japan's all-household spending declined less than the previous month, falling by 3.5% in February versus a 5.9% decline in January. Meanwhile, manufacturing PMI in March climbed to 33.8, improving from 31.6 a month earlier.

The yen edged up against the majors in the Monday session, benefiting from sharp declines in the US equity bourses. USDJPY hovers above the 98-level with interim resistance seen at 98.30, followed by 98.65 and 99. Subsequent ceilings are eyed 99.40, backed by 99.70 and 100. On the downside, support begins at 97.80, followed by 97.30 and 97. Additional floors will emerge at 96.60, backed by 96.30 and 96

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