Thursday March 30, 2006 - 14:43:23 GMT
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Forex and Commodity Market Commentary and Analysis (30 March 2006)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2100 figure and was supported around the $1.2020 level. Stops were hit above the $1.2070/ 75 level, representing the 23.6% retracement of the move from $1.3480 to $1.1640. Data released in the U.S. today saw final Q4 2005 GDP print at 1.7%, just above the previous 1.6% estimate, while the GDP price index moved to 3.5% from 3.3%. The increase in price pressures is noteworthy because the Federal Open Market Committee reaffirmed on Tuesday that it is still in a data-dependent mode regarding additional monetary tightening and rate hikes. The combination of a higher-than-expected price pressures with depressed economic growth at the end of last year could be a concern to policymakers who have publicly stated that Q1 GDP is likely to have rebounded significantly. Other data released today saw weekly initial jobless claims fall 10,000 to 302,000 while continuing claims printed around 2.48 million. The common currency gained some ground overnight after the Governor of the United Arab Emirates‚Äô central bank reiterated the central bank wants to raise the percentage of euro-holdings in its FX portfolio to 10% from the current 2% level. Some traders sold the dollar after yesterday‚Äôs five-year auction of U.S. Treasuries produced indirect bids of only 26%, the lowest in about a year. This is relevant because it suggests deceased demand for U.S. fixed-income assets from foreign central banks and monetary authorities. Data released in Germany today saw the March jobless rate at 11.4%, up from February‚Äôs 11.3% level. Also, February wholesale sales were up 1.6% m/m and 3.5% y/y while French February PPI was up 0.1% m/m. Some continue to buy the euro in anticipation of another interest rate hike by the European Central Bank as early as May. Most dealers do not expect higher rates in the eurozone next month. Euro offers are cited around the US$ 1.2225 level.
The yen moved higher vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•117.25 level and was capped around the ¬•117.90 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from ¬•113.40 to ¬•119.40. Bank of Japan Deputy Governor Iwata spoke about monetary policy overnight and said an inflation rate of 1% to 2% is desirable in the medium-term and rejected the notion the central bank will not raise interest rates before an inflation rate of 1% is evident. The BoJ ended its long-standing quantitative easing policy on 9 March and announced it will seek to keep inflation between 0% and 2% though stopped short of calling this a formal inflation target. Data released in Japan overnight saw February industrial output decline for the first time in seven months overnight. Capital flows data released overnight saw foreigners as net purchasers of Japanese equities for the week ended 25 March. At the same time, Japanese investors have been selling foreign bonds and this has led to net portfolio flows into Japan just ahead of tomorrow‚Äôs fiscal year-end there. Otherwise, dealers have been reporting less-than-normal corporate repatriation of overseas assets into Japan at the end of the fiscal year, reflecting the healthier state of Japanese corporate balance sheets and the Japanese economy. February nationwide consumer price inflation data and March Tokyo-area consumer price inflation data will be released in Japan overnight. A negative reading on deflation could cause the yen to sell-off while stronger-than-expected price pressures could be positive for yen bulls. Traders are also cautious about adopting more market risk ahead of Monday‚Äôs crucial quarterly tankan survey of corporate sentiment from Bank of Japan. The Nikkei 225 climbed 0.63% to close at ¬•17,045.34, the first time it has eclipsed the ¬•17,000 figure in more than five years. Dollar bids are cited around the ¬•117.10 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•142.20 level and was supported around the ¬•141.55 level. The British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses tested offers around the ¬•204.80 and ¬•90.25 levels, respectively. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 8.0268 in the over-the-counter market, up from CNY 8.0259, and at CNY 8.0263 in the exchange-traded market. U.S. Treasury official Adams noted China‚Äôs ‚Äúimportant achievements‚ÄĚ in moving towards a market-based exchange rate but added ‚ÄúChina could easily move more rapidly towards greater flexibility. It should do so now.‚ÄĚ
The British pound gained ground vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.7420 level and was supported around the $1.7335 level. Technically, the pair stopped just short of testing the 50% retracement of the move from $1.7620 to $1.7230. Data released in the U.K. today saw Nationwide March house prices up 1.1% m/m to levels not seen in a couple of years, dismissing last month‚Äôs first decline in eight months. This represents the latest evidence the all-important housing sector continues to stabilize and expand and was a nice reprieve for sterling after yesterday‚Äôs disappointing mortgage and CBI retail sales data. Chancellor of the Exchequer Brown spoke and railed out against the rising tide of protectionism on the Continent. Cable offers are cited around the US$ 1.7470 level. The euro moved slightly higher vis-√†-vis the British pound as the single currency tested offers around the ¬£0.6950 level and was supported around the ¬£0.6925 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.3010 level and was capped around the $1.3105 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from CHF 1.3230 to CHF 1.2870. The Swiss government today raised its 2006 GDP forecast to 2.0% from 1.8% on account of greater capacity utilization and stronger business sentiment. Dollar bids are cited around the CHF 1.2975 level. The euro gained marginal ground vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.5770 level while the British pound weakened vis-√†-vis the the Swiss franc and tested bids around the CHF 2.2660 level.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7135 level and was supported around the $0.7060 level. Data released in Australia overnight saw job vacancies in the three months to February up 4.7% and off 1.9% y/y. Australian dollar offers are cited around the US$ 0.7165 level.
The Canadian dollar lost significant ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1605 level and was capped around the C$ 1.1730 level. Technically, today‚Äôs intraday high was just above the 61.8% retracement of the move from C$ 1.1975 to C$ 1.1300. February industrial product prices will be released in Canada today. U.S. dollar offers are cited around the C$ 1.1710 level.
The New Zealand dollar appreciated vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6105 level and was supported around the $0.6040 level. The pair yesterday traded with a $0.59 handle for the first time in a couple of years. New Zealand dollar offers are cited around the US$ 0.6175 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 583.50 level and was supported around the US$ 567.20 level. Today‚Äôs high represents a fresh 25-year high and chartists are now eyeing the psychologically-important US$ 600 figure. Physical demand in India and Asian countries and Iran‚Äôs negative response to a United Nations Security Council report contributed to the pair‚Äôs gains, as did quarter-end buying activity. Silver raced higher vis-√†-vis the U.S. dollar and tested offers around the US$ 11.50 level and was supported around the $10.73 level. Today‚Äôs high was the pair‚Äôs strongest level since September 1983.
Crude oil rallied vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude for May delivery tested offers around the US$ 66.74 level and was supported around the $66.05 level. The United Nations Security Council urged Iran to end its uranium enrichment and officials in Tehran rejected the request. Security Council officials are meeting in Berlin today to consider additional steps.
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