The Usd was mixed in the Asian session, as stocks are showing only moderate weakness. The EurUsd traded down to 1.3322 from 1.3427, while the UsdJpy trended lower to 100.25 from 101.11. The Aud initially spiked lower before reversing and heading higher as the RBA unexpectedly cut rates. The AudUsd traded sharply down to 0.7045 before rapidly trading to 0.7181. Wall Street was able to rally of the session lows to close only moderately weaker. While Asia regional indexes are soft, European stock markets are trading higher. With FX / Equity correlation (a proxy for risk) well-established, traders will be watching stocks carefully. We are seeing commodities moving higher, with gold up 1.16% to $878.97oz and crude wti up 1.0%. Should equities be able to shake off negative buzz of low volume, short covering, weak earnings and lack of value we should see the greenback come under renewed selling pressure? However. Should traders embrace reality and sell into this fragile bear rally we will witness a sudden shift in the Euro fate. In Australia, the RBA surprised the market and cut rates by 25bp to 3.00%. The RBA cited downward revisions to global economic growth and domestic economy is still contracting as some of reason for the move. The accompanying statement left the door open for further rate cuts based on further deterioration in economic data. In Japan, the BOJ left rates unchanged at 0.10% but enlarged the range of collateral the banks can utilize in their transactions with the central bank. There was no mention of quantitative measures but efforts to keep borrowing costs as low as possible are ongoing. The BoJ also announced that it has resumed purchases of stocks held by banks to help shore up capital bases, and studies are still being made on providing subordinated loans to banks.
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