Monday October 2, 2006 - 15:01:57 GMT
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Forex and Commodity Market Commentary and Analysis (2 October 2006)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2730 level and was supported around the $1.2660 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from $1.2980 to $1.2460. Data released in the eurozone today saw the September purchasing managers‚Äô index print at 56.6, unchanged from August‚Äôs reading. The common currency also gained ground on the release of this report because the input and output price components were stronger-than-expected and these cement expectations that the European Central Bank will lift interest rates on Thursday by +25bps to 3.25%. The European Commission‚Äôs quarterly report was released today and it concluded EMU-12 economic growth remains solid and that monetary policy remains accommodative. In U.S. news, the September ISM manufacturing survey printed at 52.9, below expectations and down from August‚Äôs 54.5 level. The manufacturing sub-index contracted while the prices paid component fell back 61 from 73, a notable print that could lessen pressure on the Federal Open Market Committee to tighten interest rates. Also, August construction spending grew +0.3%, consistent with expectations, and August existing home sales climbed 4.3% m/m but was off 14.9% y/y. Traders await the release of September non-farm payrolls data on Friday and most expected new job creation of about 120,000. Euro bids are cited around the US$ 1.2580 level.
The yen depreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•118.40 level and was supported around the ¬•117.85 level. Today‚Äôs intraday high is the pair‚Äôs strongest showing since April of this year and traders are eyeing the ¬•119.40 as an important technical level. Many data were released in Japan overnight. First, the September quarterly tankan survey was released by Bank of Japan overnight and it evidenced a surprise rise in business confidence. The diffusion index of confidence among large Japanese manufacturers printed at +24, more-than-expected, while the sales price sub-index and inventory sub-index also improved. Also, non-financial firms foresee an increase in capital expenditures of +8.3% in the fiscal year to March 2007. Second, Nikkei reported the August diffusion index of coincident indicators due on Friday is expected to reach 88.9%, above 50% for the fifth consecutive month. Third, Nikkei reported Bank of Japan‚Äôs economic outlook scheduled for release this month may forecast CPI growth of 0.4% to 0.5% for fiscal year 2007, down from 0.6% to 0.8%. This will be closely watched by traders because Bank of Japan is still making the case for gradual interest rate increases. New Japanese prime minister Abe told the Diet he wants BoJ‚Äôs monetary policy to support the economy, especially as it emerges from deflation. Fourth, data released overnight saw employees‚Äô average pay decline in August for the first time in seven months. New Japanese Prime Minister Abe said he expects BoJ‚Äôs policies to support the economy, especially as Japan continues to emerge from deflation. The Nikkei 225 stock index climbed 0.79% to close at ¬•16,254.129. Dollar bids are cited around the ¬•117.25/ 116.65 levels. The euro gained ground vis-√†-vis the yen as the single currency tested offers around the ¬•150.20 level and was supported around the ¬•149.50 level. The British pound and Swiss franc moved higher vis-√†-vis the yen as the crosses tested offers around the ¬•221.65 and ¬•94.75 levels, respectively. In Chinese news, Premier Wen Jiabao pledged to press ahead with ‚Äúall-round economic‚ÄĚ reforms. Chinese financial markets return to normal next week after this week‚Äôs National Day holiday period.
The British pound rocketed higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.8845 level and was supported around the US$ 1.8675 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from $1.9090 to $1.8600. Data released in the U.K. today saw the September purchasing managers‚Äô index rally to 54.5 from 53.0 in August. Some traders believe Bank of England‚Äôs Monetary Policy Committee will lift interest rates on Thursday while others believe the MPC will wait until November to push rates higher. The Shadow Monetary Policy Committee voted 6-3 to lift rates last week. Cable bids are cited around the US$ 1.8710 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6760 level and was capped around the ‚ā§0.6780 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2405 level and was capped around the CHF 1.2525 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from CHF 1.1285 to CHF 1.3285. Data released in Switzerland today saw the September purchasing managers‚Äô index recede to 64.4 from August‚Äôs record 68.2 level. Also, SECO reported Swiss GDP is likely to be 2.7% in 2006 and raised its 2007 forecast to 1.7% from 1.5%. Swiss National Bank is expected to tighten policy further in December. Dollar offers are cited around the CHF 1.2685 level. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5825 and CHF 2.3355 levels, respectively.
The Australian dollar rallied vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7485 level and was supported around the $0.7435 level. Australian bids are cited around the $0.7405 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1150 level and was capped around the $1.1220 level. September PMI data will be released in Canada on Thursday followed by employment data on Friday. U.S. dollar offers are cited around the US$ 1.1230 level.
The New Zealand dollar appreciated vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6575 level and was supported around the US$ 0.6485 level. New Zealand dollar offers are cited around the US$ 0.6685 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 603.85 level and was supported around the $597.70 level. The pair continues to track oil higher. Liquidity may be reduced this week on account of China‚Äôs market holiday. Silver gained ground vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 11.71 level and was supported around the $11.42 level.
Crude oil came off vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for November delivery tested bids around the $61.87 level and was capped around the $62.37 level. Traders are awaiting news regarding possible production decreases in Nigeria and Venezuela. Market participants are also waiting for some sort of resolution in Iran‚Äôs nuclear standoff with the global community.
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