Monday March 28, 2005 - 13:51:28 GMT
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Forex Market Commentary and Analysis (28 March 2005)
The euro came off marginally vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2890 level and was capped around the $1.2960 level. The move to a fresh multi-week low occurred during Australasian dealing after stops were hit below the $1.2940 level but there was little follow-through activity with most of Europe celebrating Easter Monday. The pair struggled to get back to the $1.2925/ 35 levels during European and early North American dealing but remained pressured. French President Chirac today suggested the deal to reform the European Union’s Stability and Growth Pact “would not affect the credibility of the European currency.” Traders await the much-anticipated March U.S. non-farm payrolls jobs report with consensus forecasts anticipating around 220,000 new jobs having been created last month. Market participants also want to see if there are any revisions to February’s relatively strong rate of 262,000 new jobs. Notably, the dollar failed to rally much following February’s number even though it was above most forecasts. It will be interesting to see if the markets react similarly if the print exceeds forecasts this week. U.S. personal consumption expenditures will also be released this week for the month of February and dealers will closely monitor these as the Federal Open Market Committee directly alluded to a build-up in cost pressures in its post-meeting statement last Tuesday and the U.S. dollar subsequently rallied. Liquidity has been relatively thin today with most of Europe and London closed and should return to normal overnight when Australia and New Zealand return from their holidays. Option traders cite a $1.2825 barrier that expires on 28 March. Dealers cite bids around the $1.2880/ 70 levels and offers are seen around the $1.2925/50 levels.
The yen moved lower vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥107.15 level, the pair’s highest level this year and the highest print since 10 November. The pair could not sustain the spike, however, and the rate eroded back to the ¥106.75 level during early North American dealing. Traders await Friday’s quarterly tankan survey of manufacturing sentiment. Most market participants are expecting a +1 point gain in large manufacturers’ sentiment over the December tally. Lehman Brothers released a report that suggests the yen’s underperformance “looks overdone” and added its technical picture “looks constructive.” Lehman concluded it is a “very good opportunity to add to yen exposure.” The Nikkei 225 stock index gained 0.27% to close at ¥11,792.30. Dollar offers are cited around the ¥104.40/ 75 and ¥108.00 levels. The euro gained modest ground vis-à-vis the yen as the single currency tested offers around the ¥138.25 level and remained supported around the ¥137.65 level. Euro offers are seen around the ¥138.30/ 50/ 60 levels. Euro bids are cited around the ¥137.50 level. The British pound was largely unchanged vis-à-vis the yen as sterling tested offers around the ¥199.50 level while the Swiss franc was up marginally vis-à-vis the yen and tested offers just below the ¥89.00 figure. In Chinese news, Lehman Brothers estimated the yuan will appreciate around 5% vis-à-vis the U.S. dollar in 2005. Hu Xiaolian, assistant to People’s Bank of China Governor Zhou, will likely be named the director of China’s State Administration of Foreign Exchange (SAFE) and will become the country’s point person on liberalization of China’s FX regime. In other news, China has named a handful of foreign commercial banks as authorized foreign exchange market participants and Bank of China and CITIC have both been named authorized market makers.
The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the $1.8590 level after triggering stops below the $1.8645 level, the 50% retracement of the move from $1.7745 to $1.9550. London dealing was largely non-existent today with U.K. financial institutions closed for the Bank holiday. Traders will closely this Thursday’s Cabinet meeting for any details regarding the upcoming general election. PM Blair is likely to state the next election will be 5 May. Sterling bids are cited around the $1.8550/30 levels. The euro was off slightly vis-à-vis the British pound as the single currency tested bids around the ₤0.6920 level and capped ahead of the ₤0.6940 level. Euro offers are seen around the ₤0.6970 level.
The Swiss franc moved lower vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2060 level and was supported around the $1.1990 level. This was the pair’s strongest print since 14 February and chartists are now eyeing the technically-significant CHF 1.2140 level. Stops were reached above the CHF 1.2030 level, the 76.4% retracement of the move from CHF 1.2260 to CHF 1.1485. The Swiss March KOF leading indicator will be released on Wednesday. Dollar offers are seen around the CHF 1.2130 level. The euro and British pound both moved higher vis-à-vis the Swiss franc, testing CHF 1.5555 and 2.2470 respectively, while the Swiss franc was marginally weaker and tested bids around the ¥88.50 level.
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