Tuesday May 9, 2006 - 12:02:40 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (9 May 2006)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2660 level and was capped around the $1.2710 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $1.2785 to $1.2661. Many traders are loath to assume new market risk ahead of tomorrow‚Äôs Federal Open Market Committee interest rate decision. Fed policymakers are expected to lift the federal funds target rate by +25bps to 5.00% but dealers are more concerned with what the Fed actually says rather than what the Fed does. Some traders believe the Fed will deliver another +25bps move at the end of June while others believe the Fed may opt to pause in June and possibly tighten again as early as 8 August. March wholesale inventories data will be released in the U.S. today. In eurozone news, German March industrial output was off 2.4%. Traders continue to speculate that the European Central Bank will lift interest rates as early as June after holding their fire last week. ECB President Trichet was fairly hawkish in his remarks last week and other ECB policymakers have made it clear monetary conditions are too accommodative in the eurozone. Euro offers are cited around the US$ 1.2775/ 1.2890 levels.
The yen gained marginal ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•111.20 level and was capped around the ¬•111.90 level. The pair spiked lower during the Australasian session as after Jiji reported Bank of Japan may characterize the economy as ‚Äúexpanding‚ÄĚ for the first time since October 1991. BoJ will release its monthly report on or after 19 May and could upgrade its ‚Äúrecovering‚ÄĚ assessment. Finance minister Tanigaki verbally intervened again overnight, warning ‚Äúexcessive volatility and disorderly movements‚ÄĚ are not desirable for economic growth. His comments came just days after U.S. Treasury Undersecretary Adams told Asian players they should refrain from intervening in the market. Japanese financial authorities have not conducted overt yen-selling operations in about two years. The Nikkei 225 stock index lost 0.58% to close at ¬• 17.190.91. Dollar bids are cited around the ¬•109.55 level. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•141.25 level and was capped around the ¬•142.00 figure. The British pound and Swiss franc came off vis-√†-vis the yen as the crosses tested bids around the ¬•206.65 and ¬•90.50 levels, respectively. The Chinese yuan appreciated to post-revaluation highs vis-√†-vis the U.S. dollar as the greenback closed at CNY 8.0044 in the over-the-counter market, down from CNY 8.0070, and at CNY 8.0050 in the exchange-traded market. A Chinese government think-tank predicted the economy will expand about 9.8% in Q2. Tomorrow‚Äôs semi-annual foreign exchange report from the U.S. Treasury will be closely watched to see if China is labeled a currency manipulator by the U.S. government.
The British pound weakened vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.8515 level and was capped around the US$ 1.8590 level. Technically, today‚Äôs intraday low was just above the 38.2% retracement of the move from $1.8205 to $1.8690. Data released in the U.K. today saw BRC report U.K. retailers enjoyed sales volumes not seen in more than four years last month. Also, Land Registry reported house prices in England and Wales appreciated at an annualized rate of 5.05% in Q1. Tomorrow‚Äôs quarterly inflation report from Bank of England will be closely scrutinized to see if it offers any clues about interest rate policy. Cable offers are cited around the US$ 1.8960 level. The euro came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the ‚ā§0.6825 level and was capped around the ‚ā§0.6845 level.
The Swiss franc was little-changed vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2270 level and was capped around the CHF 1.2320 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from $1.2420 to $1.2180. The April SECO consumer climate indicator will be released tomorrow. Dollar bids are cited around the CHF 1.2250/ 10 levels. The euro and British pound moved lower vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5585 and CHF 2.2775 levels, respectively.
The Australian dollar depreciated marginally vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7635 level and was capped around the $0.7695 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from $0.6770 to $0.7985. Data released in Australia today saw the April NAB business confidence index fall 6.0 index points to 11.0. Also, Australia Treasurer Costello delivered his budget speech today and forecast an underlying budget surplus of A$ 14.8 billion in what would be the fifth consecutive surplus and ninth surplus in eleven years. Australia‚Äôs economy has expanded for sixteen consecutive years and is expected to have grown some 2.5% during the June 2006 fiscal year. Reserve Bank of Australia shocked many traders last week by lifting interest rates. Australian dollar offers are cited around the US$ 0.7755 level.
The Canadian dollar was little-changed vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1165 level and was supported around the $1.1105 level. Technically, the C$ 1.1190 level could be the pair‚Äôs next upside hurdle as the greenback tries to reclaim some of the significant ground it has recently lost. The pair came within a few pips of testing the psychologically-important C$ 1.1000 figure last week, a level not seen in decades. U.S. dollar offers are cited around the C$ 1.1300 figure.
The New Zealand dollar slumped vis-√†-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6240 level and was capped around the $0.6330 level. Stops were hit below the $0.6280 level, representing the 76.4% retracement of the move from $0.5910 to $0.7465. New Zealand dollar offers are cited around the US$ 0.6335 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 683.23 level and was supported around the $678.00 figure. The pair was partially dragged higher on account of a surge in platinum to a record high of US$ 1,198.00 per ounce. Gold established a fresh 25-year high yesterday before coming off. Geopolitical tensions, inflation jitters, and physical demand have all contributed to the pair‚Äôs recent strength. Silver backed off marginally vis-√†-vis the U.S. dollar as the pair tested bids around the $13.70 level and was capped around the $14.00 figure.
Crude oil weakened vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude futures for June delivery tested bids around the US$ 69.66 level and was capped around the $ 70.14 level. The pair moved lower yesterday after it was reported that Iranian President Ahmadinejad sent U.S. President Bush an unprecedented letter on how the two countries could work together to end their nuclear dispute. Traders await the release of weekly energy inventories data in the U.S. tomorrow.
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