Thursday August 18, 2005 - 10:37:39 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (18 August 2005)
The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2230 level and was capped around the $1.2290 level. Today’s low represents the common currency’s lowest level since 3 August and stops were triggered below the $1.2245 level, representing the 23.6% retracement level of the move from $1.3480 to $1.1870. Traders are still talking about the relatively hawkish consumer price inflation and producer price inflation data that were released in the U.S. this week. Traders are already pricing in the likelihood of a more aggressive monetary tightening from the Federal Reserve next month. Fed funds futures are currently pricing a 100% chance of a +25bps hike in interest rates at the September Federal Open Market Committee meting while the chances of a greater +50bps move are now around 12%, up from 10% earlier this week. Likewise, the market is currently pricing in +75bps of tightening through the February FOMC meeting. Data to be released in the U.S. today include weekly initial jobless claims and July leading indicators that are expected to come in around +0.2%. In eurozone news, EMU-12 harmonized consumer prices climbed 2.2% y/y last month, unchanged from provisional estimates, and up from June’s 2.1% y/y climb. The core inflation level was up 1.3% y/y last month, down from June’s 1.4% climb. Other data saw EMU-12 June industrial output up 0.3% m/m and 0.3% y/y while German producer prices gained 0.5% m/m and 4.6% y/y last month. Euro offers are cited around the $1.2275 level while euro bids are seen around the $1.2180/ 65 levels.
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥110.30 level and was supported around the ¥109.75 level. Through European dealing, the pair stopped just short of testing the ¥110.35/40 level, the 38.2% retracement level of the move from ¥112.60 to ¥109.00. Stops were reached above the ¥110.05/ 10 level, representing the 50% retracement of the move from ¥106.45 to ¥113.70 and 38.2% of the move from ¥104.15 to ¥113.70. Data released in Japan overnight reported foreign investors purchases a net ¥721.9 billion in Japanese equities last week, the largest weekly purchase since March 2004 and the ninth consecutive week of net purchases. The dollar came off around 300 pips last week during this buying frenzy and for calendar year 2005, foreign investors have purchase a net ¥5.99 trillion of Japanese equities. The Nikkei 225 stock index gained 0.28% today to close at ¥12,307.37. Dollar bids are cited around the ¥110/ ¥109.80/ ¥109.60 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥135.40 level and was supported around the ¥134.70 level. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥199.30 and ¥87.45 levels, respectively. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at the RMB 8.1008 level after closing at RMB 8.0997 level yesterday. Traders are closely watching negotiations between the U.S. and China regarding textile shipments. The U.S. government calculates Chinese textile imports have surged 54% since 1 January.
The British weakened modestly vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8025 level after encountering offers around the $1.8090 level. Technically, today’s high was just above the 76.4% retracement level of the move from $1.8330 to $1.7270. Data released in the U.K. today saw CML lending for U.K. house prices fall to £11.8 billion in July from £12.0 billion in June. Also, July retail sales printed lower 0.3% m/m, off from the 1.2% gain notched in June but estimates for a 0.5% fall. The annualized rate was up 1.8%, up from June’s 1.2% level. These data are important because they evidence final private demand in the U.K. that has held steady in the wake of last month’s London terror attacks. BBA mortgage lending data released today saw net mortgage lending rise £3.7 billion last month, down from £4.7 billion in June. Cable offers are cited around the $1.8085/ $1.8115 levels. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the £0.6770 level and was capped around the £0.6805 level.
The Swiss franc lost ground vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2645 level and was supported around the CHF 1.2585 level. Technically, the pair is trading between the 23.6% and 38.2% retracement levels of the recent CHF 1.3055 – CHF 1.2430 range. Data released in Switzerland today saw June retail sales climb 3.2% m/m and 7.3% y/y. Dollar bids are cited around the CHF 1.2565 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.5450 level while the British pound gained ground vis-à-vis the Swiss franc and tested offers around the CHF 2.2820 level.
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