Wednesday May 31, 2006 - 15:42:13 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (31 May 2006)
The euro came off vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2835 level after testing offers around the $1.2905 level. Technically, today‚Äôs intraday high was just above the 61.8% retracement of the move from $1.3665 to $1.1640. Traders await the release of the Federal Open Market Committee‚Äôs meeting minutes from 10 May later today for any clues as to how close Fed policymakers may be to ending their current tightening cycle. FOMC policymakers have adopted an increasingly data-dependent attitude lately. Friday‚Äôs May U.S. non-farm payrolls data will be the last payrolls report before the Fed convenes in late June to deliberate interest rates. ADP‚Äôs national employment survey evidenced an increase of 122,000 jobs this month and U.S. retailers‚Äô same-store sales were off 1.0% in the week ending 27 May. In other U.S. news, the Chicago purchasing managers‚Äô index rose to 61.5% from April‚Äôs 57.2%, much stronger-than-expected and the highest level since October 2005. Also, the prices paid index fell to 76.9% from 77.2%, the new orders index increased to 69.6% from 60.8%, and the employment index improved to 52.8% from 47.2%. In eurozone news, EMU-12 harmonized consumer prices were up 2.5% y/y in May, up from April‚Äôs 2.4% y/y increase. Many traders believe these data could force the European Central Bank to lift its main refinancing rate by +50bps on 8 June, especially after yesterday‚Äôs heightened M3 money supply and credit growth data were released. Other data released saw the European Commission‚Äôs EMU-12 economic sentiment indicator rise to 106.7 this month, its strongest print since mid-2001 and up from 105.7 in April. German data released today saw the May jobless rate decline 93,000 while the unemployment rate receded to 11.0% from April‚Äôs 11.3% level. Euro offers are cited around the US$ 1.3045 level.
The yen came off marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•112.35 level and was supported around the ¬•111.45 level. Technically, today‚Äôs intraday high was just above the 23.6% retracement of the move from ¬•147.65 to ¬•101.30. Data released in Japan today saw April orders received by the 50 largest contractors up 2.7% y/y and April housing starts were up 15.0% y/y. The May monetary base will be released tomorrow. The Nikkei 225 stock index shed 2.47% to close at ¬•15,467.33. Dollar bids are cited around the ¬•109.60 level. The euro moved lower vis-√†-vis the yen as the single currency tested bids around the ¬•143.80 level and was capped around the ¬•144.45 level. The British pound and Swiss franc depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•209.95 and ¬•92.20 levels, respectively. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar as the greenback closed at CNY 8.0175 in the over-the-counter market, down from CNY 8.0320, and at CNY 8.0205 in the exchange-traded market. People‚Äôs Bank of China reiterated it will keep the yuan ‚Äúbasically stable at a reasonable and balanced level‚ÄĚ but added ‚Äú"In the initial stage after the yuan exchange rate formation mechanism reform, the central bank had to adopt open-market operations to soothe market fluctuation and to play the role of 'fluctuation stabilizer.‚Äô‚ÄĚ Additionally, PBOC noted it will ‚Äúgradually reduce the frequency of its open-market operations and weaken their intensity as a way to gradually step out of the market.‚ÄĚ This surprised traders and let to the pair‚Äôs sharp depreciation. The central bank also reported it sees GDP growth around 10%.
The British pound depreciated sharply vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.8710 level and was capped around the $1.8855 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from $1.9025 to $1.8530. Data released by Bank of England today saw April mortgage lending recede marginally to +‚ā§8.5 billion while mortgage approvals levels fell to their lowest level in more than six months. Nationwide reported May house prices were up 0.2% m/m and 4.7% y/y and final M4 money supply was up 1.3% m/m. Additionally, U.K. GfK consumer confidence worsened to -5 from -4 in April. Moreover, CBI‚Äôs monthly distributive trades survey reported retailing jobs are being lost at an appreciable rate even though the retail market seems to be improving. CBI reported 36% of retailers reported higher sales volumes in May over a year ago. Cable offers are cited around the US$ 1.8835/ 1.8905 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6865 level and was supported around the ‚ā§0.6825 level.
The Swiss franc weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2160 level and was supported around the CHF 1.2060 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from CHF 1.1285 to CHF 1.3285. Data released in Switzerland today saw the May KOF indicator improve to 2.30 in May from 2.12 in April and 1.94 in March. Dollar bids are cited around the CHF 1.1990. The euro moved vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.5610 level while the British pound came off vis-√†-vis the Swiss franc and tested bids around the CHF 2.2720 level.
The Australian dollar depreciated vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7535 level and was capped around the $0.7655 level. Chartists are eyeing the $0.7520 level as the pair‚Äôs next downside target. Data released in Australia today saw the April trade deficit recede to ‚ÄďA$ 1.093 billion while April private sector credit growth was up 1.3%. Australian dollar offers are cited around the US$ 0.7615 level.
The Canadian dollar moved lower vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1010 level and was supported around the C$ 1.0925 level. Technically, today‚Äôs intraday high is right around the 23.6% retracement of the move from C$ 1.1275 to C$ 1.0925. Data released in Canada today saw April inflation increase 2.4% while the ex-energy component receded to 1.6% from 1.7% in March. Also, it was reported that Q1 2006 GDP expanded 0.9% and at an annualized rate of 3.8%. U.S. dollar offers are cited around the C$ 1.1060 level.
The New Zealand dollar came off vis-√†-vis the U.S. dollar today as kiwi tested bids around the US$ 0.6345 level and was capped around the $0.6430 level. New Zealand dollar offers are cited around the US$ 0.6495 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 641.80 level and was capped around the $ 660.00 figure. Silver moved lower vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 12.48 level and was capped around the $13.12 level.
Crude oil came off vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude futures for July delivery tested bids around the US$ 70.04 level and was capped around the $72.11 level. Traders await weekly U.S. inventories data due today.
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