Monday April 3, 2006 - 14:17:28 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (3 April 2006)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2030 level and was capped around the $1.2125 level. Technically, today‚Äôs intraday high was just above the 50% retracement of the move from $1.2590 to $1.1640. The big event on traders‚Äô radar this week will be Friday‚Äôs March non-farm payrolls number. Most economists are expecting a decent number with possible upward revisions to previous months‚Äô results. Weekly initial jobless claims were fairly firm in March, orbiting the 300,000 level. A strong non-farm payrolls number would likely see the U.S. dollar appreciate on the notion the Federal Open Market Committee will likely tighten interest rates by at least another +25bps, if not more. The FOMC next convenes on 10 May to deliberate policy and some traders also foresee a +25bps move at the end of June. Data released in the U.S. today saw the March ISM manufacturing index recede to 55.2 from February‚Äôs 56.7 level while February construction spending was up +0.8%, more-than-expected. The prices paid component of the ISM index came in at 66.5, stronger than recent prints and this may fuel some concerns over inflation. Friday‚Äôs stronger-than-expected March University of Michigan consumer sentiment index in the U.S. surprised many traders. In eurozone news, EMU-12 March manufacturing PMI improved to 56.1 from February‚Äôs 54.5 print, the best reading since September 2000 and above forecast. European Central Bank will convene on Thursday and is not expected to raise interest rates at this time. Most traders, however, believe the ECB will lift borrowing rates as early as May and today‚Äôs positive PMI surveys reinforce this view, including Germany‚Äôs 58.1 print. A Bank of Spain report issued today declared monetary policy is too accommodative in the eurozone. February unemployment and PPI data will be released in the eurozone tomorrow. Euro offers are cited around the US$ 1.2225 level.
The yen moved lower vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•118.80 level and was supported around the ¬•117.55 level. Technically, today‚Äôs intraday low was just above the 50% retracement of the move from ¬•121.40 to ¬•113.40. Surprisingly, data released overnight saw a pullback in Bank of Japan‚Äôs quarterly tankan survey of confidence among large manufacturers for the first time in four quarters. The main diffusion index printed at +20, below forecast, while the diffusion index for large non-manufacturers rallied to its strongest showing in fourteen years. All firms reported a 10.6% increase in planned capital expenditures, up from the previous quarter. Some dealers reported yen-selling after Friday‚Äôs fiscal year-end in Japan as investors poured money into overseas markets today following repatriation of overseas assets last month. Traders continue to speculate when Bank of Japan will begin to raise interest rates following its decision in March to end its long-standing quantitative easing policy. The Nikkei 225 stock index started the new fiscal year off on the right foot today, adding 1.60% to close at ¬•17,333.31, a fresh five-year high. Dollar bids are cited around the ¬•117.40 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•143.05 figure and was supported around the ¬•142.40 level. Chartists are eyeing the ¬•143.40 level as the pair‚Äôs next upside target. The British pound moved lower vis-√†-vis the yen as sterling tested bids around the ¬•204.05 level while the Swiss franc moved higher vis-√†-vis the yen and tested offers around the ¬•90.50 level. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 8.0199 in the over-the-counter market, up from CNY 8.0172 yesterday, and at CNY 8.0190 in the exchange-traded market. JPMorgan Chase Bank reported the yuan will likely appreciate an additional 12% by the end of 2006. People‚Äôs Bank of China said overnight that ‚Äúit‚Äôs not time to raise interest rates now.‚ÄĚ Data released in China overnight saw the March manufacturing PMI survey improve to 51.0 from February‚Äôs 50.7 level. The government reported it sees 2006 GDP up 9.3% with CPI up 2%-3% and retail sales up 13%.
The British pound extended recent losses vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.7250 level and was capped around the $1.7380 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $1.7620 to $1.7230. Data released in the U.K. today saw the March CIPS PMI manufacturing index recede to 50.8, its lowest print since August 2005. This is a stark contrast to the eurozone‚Äôs print of 56.1, a multi-year high. The lower-than-expected U.K. print evidences the continued problems faced by the manufacturing sector that accounts for about 17% of national GDP. Bank of England‚Äôs Monetary Policy Committee convenes on Thursday and is not expected to reduce interest rates at this time. Cable offers are cited around the US$ 1.7435 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ¬£0.69875 level and was supported around the $0.6950 level.
The Swiss franc receded vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.3135 level and was supported around the $1.3030 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from CHF 1.2240 to CHF 1.3285. Data released in Switzerland today saw the March PMI survey printed at 65.2, above the ‚Äúboom or bust‚ÄĚ 50.0 lever of the thirteenth consecutive month and its highest level since May 2000. March CPI data will be released tomorrow. Dollar bids are cited around the CHF 1.3050 level. The euro was mostly flat vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.5810 level while the British pound moved higher vis-√†-vis the Swiss franc and tested bids around the CHF 2.2610 level.
The Australian dollar came off vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7130 level and was capped around the $ 0.7180 level. Data released in Australia overnight saw the February trade balance print at ‚ÄďA$595 million, an improvement from January‚Äôs ‚ÄďA$ 2.476 billion level. Also, the ANZ March jobs ads index was up 2.4% m/m ad 22.7% y/y. Other data expected this week include March employment data on Thursday and housing finance on Friday. Australian dollar offers are cited around the US$ 0.7210 level.
The Canadian dollar depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1770 level and was supported around the $1.1675 level. Today‚Äôs high represents the pair‚Äôs strongest showing since 19 January. Canadian PMI data will be released on Thursday followed by unemployment data on Friday. U.S. dollar offers are cited around the C$ 1.1815 level.
The New Zealand dollar weakened vis-√†-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6115 level and was capped around the $ 0.6175 level. New Zealand dollar offers are cited around the US$ 0.6230 level.
Gold extended recent gains vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 588.70 level and was supported around the $581.40 level, right around a fresh 25-year high. Dealers are citing a flow of investment funds from bonds to gold and chartists expect some consolidation before the pair hones in on the psychologically-important US$ 600 figure. Silver moved higher vis-√†-vis the U.S. dollar today as the pair tested offers around the $11.76 level and was supported around the $11.47 level.
Crude oil moved higher vis-√†-vis the U.S. dollar today as light, sweet crude for May delivery tested offers around the US$ 67.23 level and was supported around the $66.20 level. Traders bought crude following Iran‚Äôs disclosure that it will test-fire more missiles this week. Iran test-fired another missile yesterday and this comes as Iran refuses to end its uranium enrichment program in condemnation of calls for same from the United Nations Security Council. Oil was also higher on account of supply disruptions in Nigeria where some 25% of that country‚Äôs production is closed on account of attacks from militants. Supply data released last week saw a larger-than-expected drawdown in U.S. gasoline stocks and some chartists are again eyeing the $70.85 level, last year‚Äôs all-time high.
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