JPY, CHF risk averse; EUR not so much
Written by Jamie Coleman
April 12, 2011 at 20:29 GMT

* Goldman says Brent Crude will fall to $105. Closes today below $121.00, down $3
* US trade deficit narrows to $45.8 in Feb from $46.9 in January
* BOC holds rates steady at 1.0%
* Fed’s Dudley: US employment gains may not be sustainable; first quarter growth to be somewhat disappointing
* IBD economic optimism survey 40.8 in April versus 43.0 in March
* $US March budget deficit $188.2 bln versus $65 bln March 2011
* ECB’s Stark: Cannot tailor monetary policy to individual economies
* WTI falls $4.05 to $105.87; gold falls $10 to $1452; Copper falls $1.7%, CRB falls 1.9%
* S&P 500 falls 0.8% to 1314
* US 10 year note yield falls 9 bp to 3.50%

Most of the hoopla in the market today was centered on further unwinding over overweight commodities positions and associated carry trades as Goldman put another bullseye on oil prices, suggesting Brent should fall about $20 from where it was trading when they put out their report.

EUR/USD took it all in stride. The single currency managed a rally to the 1.4520 level after dovish comments from the Fed;s Dudley and sufficiently wide US trade deficit figures to shave a few tenths of a percentage of Q1 GDP forecasts. We slipped back to the 1.4437 level on long-liquidation late in European trade but we stabilized ahead of 1.4430 support (61.8% of 1.4375/1.4520) and range traded between 1.4475 and 1.4495 the balance of the afternoon.

USD/JPY fell as low as 83.51 in US trade but respected the support provided by the 200-day moving average at 83.48. W traded up to the low 83.80s at mid-afternoon but end on a weak note, at 83.60. Softer US yields, liquidation of carry trades and a general risk-off sentiment were headwinds for USD/JPY today.

CHF was in demand as the wind came out of commodities sales. Short CHF positions were covered heavily today, like those in JPY. USD/CHF fell as low as 0.8942 before stabilizing. We close at 0.8970.

AUD/USD rallied strongly in early US trade, rising back above 1.0510, reaching 1.0520 where China promptly sold into the rally. We end the day at 1.0440, the lows for the US session as carry trades are trimmed amidst the setback in commodities.

GBP/USD was pressured for much of the US session as a surprising fall in UK inflation further reduced the odds of a hike by the BOE anytime soon. We end at 1.6253.