Tuesday September 12, 2006 - 15:00:48 GMT
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Forex and Commodity Market Commentary and Analysis (12 September 2006)
The euro came off marginally vis-Ă -vis the U.S. dollar today as the single currency tested bids around the US$ 1.2685 level and was capped around the $1.2735 level. European Central Bank officials were hawkish in their remarks today, reinforcing the notion that interest rates are likely to be moved higher next month. ECBâ€™s Garganas reported he is â€śvery worriedâ€ť about high EMU-12 inflation while ECBâ€™s Constancio reported interest rates are not yet inhibiting growth in the eurozone. In other eurozone news, German August wholesale prices were up 5.3% y/y, above forecast, and Germanyâ€™s IWH leading economic think tank reduced its 2007 GDP forecast to 0.8% from 1.2%. In U.S. news, the U.S. trade balance reached a record deficit of â€“US$ 68 billion in July, worse-than-expected and below the previous record of â€“US$ 66.6 billion from October 2005. For 2006 year-to-date, the deficit is around -US$ 776 billion and this means the U.S. is on track to register a wider trade imbalance for the fifth consecutive year. Oil imports were up some 5% m/m and this helped push the deficit to record levels. The U.S.â€™s trade deficit receded marginally to â€“US19.6 billion and is on track to exceed 2005â€™s record level of â€“US$ 202 billion. Dealers are now curious to see if Treasury International Capital portfolio inflows data confirm that the U.S. financed its massive trade deficit two months ago with incoming foreign investment. U.S. retail sales and CPI data will be released on Thursday and Friday, respectively. Euro bids are cited around the US$ 1.2650/ 1.2560 levels.
The yen was little-changed vis-Ă -vis the U.S. dollar today as the greenback tested bids around the ÂĄ117.40 level and was capped around the ÂĄ117.70 level. Chartists are eyeing the ÂĄ118.40 level as the pairâ€™s next upside target. Todayâ€™s range was thin despite a myriad of factors relating to Japan and the yen. First, August consumer confidence fell to 47.6 from 48.6 in July. Second, the August wholesale goods price index improved 3.4% y/y, a 25-year high. These data are important because they evidence a move further away from deflation. Third, and to that end, the Nikkei reported the government is likely to omit the word â€śdeflationâ€ť from its September economic assessment that will be released on Friday. Fourth, the Kyodo news agency is reporting that a draft Group of Seven communiquĂ© to be released later this month does not contain a reference to currencies. This suggests there could be less official pressure on the yen and the yuan to appreciate. The Nikkei 225 stock index shed 0.48% to close at ÂĄ15,719.34. Dollar bids are cited around the ÂĄ116.75 level. The euro was little-changed vis-Ă -vis the yen as the single currency tested bids around the ÂĄ149.15 level and was capped around the ÂĄ149.75 level. The British pound and Swiss franc moved higher vis-Ă -vis the yen as the crosses tested offers around the ÂĄ220.75 and ÂĄ94.75 levels, respectively. The Chinese yuan appreciated vis-Ă -vis the U.S. dollar as the greenback closed at CNY 7.9465 in the over-the-counter market, down from CNY 7.9542, and at CNY 7.9463 in the exchange-traded market. Data released in China today saw its August trade surplus reach a record US$ 18.8 billion. Other data released today saw the M2 money supply up 17.9% y/y at the end of August while August retail sales were up 13.8% y/y and August fixed asset investment was up 21.5% y/y.
The British pound climbed higher vis-Ă -vis the U.S. dollar today as cable tested offers around the US$ 1.8770 level and was supported around the $ 1.8640 level. Stops were reached above the $1.8720 level, representing the 23.6% retracement of the move from $1.9090 to $1.8600. Data released in the U.K. today saw the consumer price index rise 2.5% y/y in August, above expectations and above Julyâ€™s +2.4% y/y pave. This equals the highest rate since records began in January 1997 and traders moved into cable on the notion that Bank of Englandâ€™s Monetary Policy Committee may be forced to deliver another interest rate hike to contain price pressures. The MPC lifted the headline repo rate to 4.75% last month. Cable bids are cited around the US$ 1.8535 level. The euro came off vis-Ă -vis the British pound as the single currency tested bids around the â‚¤0.6770 level and was capped around the â‚¤0.6810 level.
The Swiss franc depreciated vis-Ă -vis the U.S. dollar today as the greenback tested offers around the CHF 1.2495 level and was supported around the CHF 1.2400 figure. Traders moved into the Swiss franc earlier after it was reported gunmen attacked the U.S. embassy in Damascus but were unable to ignite their car bomb. U.S. dollar offers are cited around the CHF 1.2520/ 1.2685 levels. The euro and British pound appreciated vis-Ă -vis the Swiss franc as the crosses tested offers around the CHF 1.5840 and CHF 2.3395 levels, respectively.
The Australian dollar moved higher vis-Ă -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7540 level and was supported around the $0.7500 figure. Technically, todayâ€™s intraday low was right around the 50% retracement of the move from $0.7985 to $0.7015. Data released in Australia today saw the NAB August business confidence index slip to +6 from +10 in July. Australian dollar bids are cited around the US$ 0.7385 level.
The Canadian dollar appreciated vis-Ă -vis the U.S. dollar today as the greenback tested bids around the C$ 1.1170 level and was capped around the C$ 1.1220 level. Stops were hit below the $1.1180 level, representing the 23.6% retracement of the move from $1.1030 to $1.1225. Data released in Canada today saw the July merchandise trade surplus recede to C$ 3.9 billion from Juneâ€™s C$ 4.1 billion level. U.S. dollar offers are cited around the C$ 1.1245 level.
The New Zealand dollar moved higher vis-Ă -vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6435 level and was supported around the $0.6375 level. New Zealand dollar offers are cited around the US$ 0.6495 level.
Gold moved higher vis-Ă -vis the U.S. dollar today as the yellow metal tested offers around the US$ 599.90 level and was supported around the $584.40 level. Traders bargain-hunted after the pair gave back more than US$ 20 yesterday. Silver moved higher vis-Ă -vis the U.S. dollar today as the pair tested bids around the US$ 11.10 level and was capped around the $11.39 level.
Crude oil came off vis-Ă -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for October delivery tested bids around the US$ 65.09 level and was capped around the $66.39 level. Traders are watching the situation in Nigeria where two oil workersâ€™ unions are threatening a three-day strike from tomorrow. Market participants continue to monitor the situation involving Iran.
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