Forex Market Commentary and Analysis (20 May 2010)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2595
level and was supported around the $1.2295 level. The common currency escalated sharply during
the North American session on market rumours the European Central Bank was
intervening.The rumour precipitated an
acute move, propelling the common currency higher by more than 150 pips in
short order.There was no official
indication as to whether or not the ECB was on the bid but the euro is so
oversold that major short-covering can occur anytime rumours like this emerge.There was also a rumour that the ECB held an
emergency meeting to discuss the debt crisis in the eurozone and this also led
to short-covering.Most technicians
believe the euro will test key long-term technical support levels around the
US$ 1.2020 level and eventually absorb the psychologically-important US$ 1.2000
figure.The pair also continues to
spiral downward in reaction to Germany‚Äôs ban on naked short selling this
week.ECB President Trichet today
reiterated the central bank‚Äôs policies do not represent quantitative easing and
said the ECB is ‚Äúinflexibly attached to price stability, our primary mandate.‚ÄĚ
Data released in the eurozone today saw EMU-16 May consumer condidence worsen
to -18 from -15 and many data will be released tomorrow including PMI surveys
and current account numbers.German data
released today saw April producer prices up 0.8% m/m and 0.6% y/y.In
U.S. news, data released today saw weekly initial jobless claims grow to
471,000 from last week‚Äôs revised 446,000 level and continuing jobless claims
fell to 4.625 million.Also, April
leading indicators were off 0.1% and the May Philadelphia Fed index ticked
higher to 21.4.Fed Governor Tarullo
warned the crisis in Europe may slow the global economic recovery and the U.S.
economy.The Fed‚Äôs balance sheet reached
a record US$ 2.35 trillion on recent mortgage purchases.A new financial regulatory bill is sailing
through the U.S. Senate and the Fed may find its powers broadened.Outgoing Fed Vice Chairman Kohn called for
the U.S. of regulatory tools to prevent asset bubbles.Euro bids are cited around the US$ 1.2140
The yen appreciated vis-√†-vis the U.S. dollar today as the
greenback tested bids around the ¬•88.95 level and was capped around
the ¬•91.85 level. Traders expanded their
long yen positions as global market sentiment crumbled further over European
credit woes.Dealers shook off news that
Japan‚Äôs economy grew less-than-expected in the first quarter on weak
consumption.GDP expanded an annualized
4.9% and nominal GDP was up 1.2% q/q, the largest climb in a decade.Finance minister Kan again called on Bank of
Japan to support the economy further.Consumer
spending accounted for only about 17% of the quarterly growth rate, the latest
indication that final private demand remains moribund.The domestic demand deflator was off 1.9%, a
moderation in price declines and the smallest decline in a year.BoJ‚Äôs Policy Board will announce its interest
rate decision overnight and is expected to keep its benchmark overnight call
rate target unchanged at 0.10%.The
government will continue to pressure the central bank to do more to counter
deflationary pressures. The central bank will likely announce plans to assist
lenders in providing credit to certain segments of the Japanese economy.Data released in Japan overnight saw Q1
housing loans were up 1.0% y/y. The
Nikkei 225 stock index lost 1.54% to close at ¬•10,030.31.U.S. dollar offers are cited around the ¬•96.85
level.The euro moved lower vis-√†-vis the yen as the single currency
tested bids around the ¬•109.45 level and was capped around the ¬•114.10 level.The
British pound moved lower vis-√†-vis the yen as sterling tested bids around
the ¬•126.70 level while the Swiss franc moved
lower vis-√†-vis the yen and tested bids around the ¬•77.05 level. In Chinese news, the U.S. dollar appreciated
vis-√†-vis the Chinese yuan as the greenback closed at CNY 6.8277 in the
over-the-counter market, up from CNY 6.8275. Market talk suggests the U.S. and China will
deemphasize a revaluation of the yuan when officials meet soon.
British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids
around the US$ 1.4230 level and was capped around the $1.4465 level. Bank of England Monetary Policy Committee
member Posen reported eurozone problems will reduce the U.K.‚Äôs consumer price
inflation despite ‚Äúupside risks to inflation.‚ÄĚMPC member Tucker warned the sharp monetary easing may lead to
exuberance.Data released in the U.K.
today saw April retail sales up 0.3% m/m and 1.8% y/y.Cable bids are cited around the US$ 1.4110
level.The euro appreciated vis-√†-vis the British pound as the single
currency tested offers around the ¬£0.8715 level and was supported around the ¬£0.8560
franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids
around the CHF 1.1450 level and was capped around the CHF 1.1575 level.The May ZEW survey‚Äôs expectations index
tumbled to 40.5 from the prior reading of 53.4.Swiss National Bank Vice Chairman Jordan reported the central bank is ‚Äúdecisively‚ÄĚ
averting an appreciation of the franc, leading to speculation the SNB‚Äôs actions
prompted today‚Äôs massive short covering in the euro.U.S. dollar bids are cited around the US$
1.1110 level.The euro gained ground vis-√†-vis the Swiss franc as the single
currency tested offers around the CHF 1.4455 level while the British pound lost ground vis-√†-vis the Swiss franc and tested
bids around the CHF 1.6380 level.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
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Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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