Monday May 30, 2005 - 14:15:42 GMT
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Forex Market Commentary and Analysis (30 May 2005)
The euro moved sharply lower vis-à-vis the U.S dollar today as the single currency tested bids around the US$ 1.2463 level, a major retracement level. Today’s low is right around the 23.6% retracement level of the move from $0.8565 to $1.3665 and a move through this level opens up the $1.2385 level, the 23.6% retracement level of the pair’s lifetime range. The driver of the day was yesterday’s referendum in France on whether or not to adopt the European Constitution. As expected, the “no” camp was victorious, claiming 54.87% of the vote. Liquidity was expected to be thinner-than-normal on account of holidays in the U.K. and U.S. The French vote comes a couple of days before Dutch voters go to the polls to vote on the same issue and may push back the European Union’s larger integration plans for central and eastern Europe. The vote may also mean an end to Jacques Chirac’s political career. The euro is a currency with a fractious political base of support and questionable levels of both economic and monetary union. The eurozone as a whole is experiencing a difficult time both economically and financially and the French vote only exacerbates these problems. Chicago May PMI and consumer confidence data will be released in the U.S. tomorrow. Euro offers are cited around the $1.2550 level.
The yen was little-changed vis-à-vis the U.S. dollar today as the greenback was supported around the ¥107.75 level and was capped around the ¥108.15 level. More yen strength was evident on the yen crosses where it gained ground vis-à-vis the euro, British pound, Swiss franc, and Australian dollar. Technically, today’s intraday low is around the 50% retracement level of the move from ¥107.25 to ¥108.25. Data released in Japan today saw April industrial output gain 2.2% m/m and 0.6% y/y, in-line with forecasts, while it is projected to decline 2.3% in May and rise 1.4% in June. Many more Japanese economic data will be released tonight including May PMI, April jobless numbers, April personal income, and April household spending. The Nikkei 225 stock index gained 0.66% to close at ¥11,266.33. Dollar bids are cited around the ¥ 107.70/ 50/ 30 levels. The euro tanked vis-à-vis the yen as the single currency tested bids around the ¥134.60 level and was capped around the ¥135.50 level. The “no” vote in France caused the cross to dive sharply and gap 55 pips lower at the open. In Chinese news, People’s Bank of China Vice Governor Su Ning reported China will continue to work on making the yuan currency freely convertible. China announced overnight that it will cancel export tariffs on 81 categories on textiles from 1 June.
The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the $1.8195 level and topped-out around the $1.8255 level. The pair has now traded below the $1.8200 figure twice in the past week, only the second time it has done so since October 2004. A banking holiday in the U.K. means activity in the U.K. is muted today. The May GfK consumer confidence survey and June CBI distributive trends survey will be released tomorrow. In M&A news, some media outlets are reporting that Banco Santander Central Hispano SA is selling €2.2 billion in Abbey Life assets, though this report remains unconfirmed. Cable offers are seen around the $1.8275/ $1.8305 levels. The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.6845 level and was capped around the ₤0.6880 level.
The Swiss franc moved lower vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2390 level and was supported around the CHF 1.2315 level. The pair accelerated above the CHF 1.2350 level during early North American dealing today and appeared poised to attempt a run at the CHF 1.2400 figure. Swiss May CPI data will be released tomorrow. Dollar offers are cited around the CHF 1.2485 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5440 level and was capped around the CHF 1.54560 level.
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