The USD continues to gain as risk appetite declines. Market participants had entered this earning season with a false sense of optimism and high expectations, which is fading fast. Alcoa (AA) posted disappointing earnings in yesterday's (Tuesday) US session, which nows forces traders to reexamine March's unprecedented rally (short convering driven) and to reconcile their expectations with the corresponding weak economic data. The S&P [[^GSPC]] closed the trading day lower by -2..38% and Asian equity markets continued the downward trend, with the Hang Seng [[^HSI]] closing down -4.42%.

And to make matters worse, Ireland announced an emergency austerity plan in the face of deteriorating economic conditions, which highlights that the after shock of the financial crisis have not vanished. And while Ireland economy is small relatively to the Eurozone it will spark fear of other weak economies in the region and weigh on the EUR.. This week equities (driven by corp. earnings) will be the usual source of pressure on risk appetite but should economic data also begins to disappoint newly-elevated expectations, risk assets and currencies may see another move lower. In this environment the USD and the JPY should continue to benefit from mounting worries, with the EUR and high yielders taking much of the selling brunt.

Overnight, UK Nationwide consumer confidence registered a surprise decline to 41 vs. 45 exp, below lasts month's 43. While the wider British economy has shown some level of stabilization and aggressive action by the BoE helping credit markets, it seems that the deteriorating labor market continues to weigh on sentient.

In Australia, the consumer confidence released this morning surged in April to 92.7, emphasizing that the Australian economy is holding up slightly better than its peers in the G10. The improved confidence can be attributed to stronger household cash flow and supervision of liabilities as housing prices have managed to start climbing again after a difficult period. I expect when risk appetite returns in a controlled and sustained way for the AUD to be one of the best performers.

In Japan , the Economy Watchers Survey household DI, jumped to 30.0 in March (February 21.5). While 50 point is still a significant distance away, the improvement was substantial and the level is the highest since July last year. In addition, data released overnight showed a slight improvement in the current account as the trade balance swung back into a surplus of JPY 202.1bn, vs. JPY -844.4bn previously. And finally in a surprise move Thailand's central bank (BoT) cut rates 25bp to 1.25%.


The Risk Today:
Eur/Usd Earnings season puts risk appetite on hold. Dollar strengthens as continued doubts on the Talf plague markets. The EURUSD's bullish advance (That culminated at 1.3582 on April 6th) has lost much of its steam, consolidating in after hours trading yesterday and failing to break 1.3300. For the time being we see a strong bearish impetus, eyes on 1.3167 as initial support. Further weakness towards 1.3116 would complete skewed double top formation and break for the gallows. That said, is this risk hiatus temporary? A return above 1.3200 could see a retracement move being seriously considered, however anything below 1.3300 can't be deemed a change in short-term trend.

Gbp/Usd Inclining trend on the monthly chart remains intact however we are nearing the trendline base which would trigger at 1.4632. A failure to hold would see a return to yesterday's low of 1.4585 (loose neckline). However, on par Industrial figures yesterday could keep the Sterling well poised in the near term. A rebound would focus crucial 1.4779 level (recurring support/resistance this past week).

Usd/Jpy Retracement from past 100.00 sees pair currently testing a resistance at 99.88. Psychological keylevel stands at 100.00, which then sets the tone for resistance at 100.85. For the time being (seeing as the USD is strong against other majors) our focus is lower, continued weakness will first reel in 99.57 and allow for 98.40.

Usd/Chf Swissy's strength yesterday saw a sharp turnaround in early hour trading as we failed to break 1.1415. Textbook inverse head and shoulders is currently completing itself, strong resistance at 1.1500. Expect bullish trend to continue to seesaw higher for the time being with key levels at 1.1550 and 1.1770.