Friday October 6, 2006 - 14:34:07 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (6 October 2006)
The euro came off appreciably vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.2585 level and was capped around the $1.2720 level. Technically, todayâ€™s intraday high was right around the 50% retracement of the move from $1.2980 to $1.2460 and the common currency has not been this weak since 26 July. The big news out today was the release of U.S. September non-farm payrolls data that evidenced new jobs growth of a mere 51,000 jobs, significantly below expectations of 120,000. The kneejerk reaction to the headline figure was to sell the dollar but a strong upward revision to Augustâ€™s jobs tally from 128,000 to 188,000 saw the dollar move higher. Also, the unemployment rate moved lower to 4.6% from 4.6%, suggesting the U.S. economy may be near full employment. Additionally, average hourly earnings were up +0.2% m/m, consistent with expectations, but were up +4.0% y/y, the strongest pace since March 2001. The earnings and unemployment rate data will also be a concern to Federal Reserve policymakers who have made it clear in recent days that they have not yet ruled out additional monetary tightening and have given the impression the federal funds futures market is ahead of itself in pricing in a Fed easing early next year. Philadelphia Fed President Plosser yesterday said U.S. interest rates may not be high enough to deal with the current level of inflation and Fed Vice Chairman Kohn the other day said he is more concerned with higher inflation pressures than he is with the slowdown in the U.S. housing market. In eurozone news, European Central Bank President today made it very clear he does not want to change the marketâ€™s current view regarding inflation expectations and traders interpreted this as a strong likelihood the ECB will move on rates in December following yesterdayâ€™s hike. Data released in Germany today saw orders for manufactured products climb 3.7% m/m in August. Euro bids are cited around the US$ 1.2560/ 1.2415 levels.
The yen depreciated sharply vis-Ã -vis the U.S. dollar today as the greenback tested offers around the Â¥118.70 level and was supported around the Â¥117.60 level. Technically, todayâ€™s intraday low was right around the 23.6% retracement of the move from Â¥115.55 to Â¥118.30 and todayâ€™s intraday high was the pairâ€™s strongest showing since 13 April. Data released in Japan today saw the August leading index decline to 20.0 from 27.3 in July while the coincident index printed at 77.8 compared with 75.0. Also, Japanese foreign exchange reserves reached a record high of US$ 881.27 billion at the end of last month and this will only be overshadowed by speculation that Chinaâ€™s FX reserves will soon surpass the psychologically-important US$ 1 trillion level. The big news to watch this weekend may involve a nuclear missile test by North Korea, an event that could dent the yen depending on what happens and lead to a significant verbal response from the international community. Traders are also talking about the lack of additional verbal intervention from Japanese monetary authorities late this week following heightened comments earlier in the week. Most traders do not believe Japan will conduct actual intervention anytime soon. Japanese financial markets will be closed on Monday for a market holiday. The Nikkei 225 stock index came off 0.08% to close at Â¥16,436.06. Dollar bids are cited around the Â¥116.75 level. The euro moved higher vis-Ã -vis the yen as the single currency tested offers around the Â¥149.80 level and was supported around the Â¥149.20 level. The British pound and Swiss franc gained ground vis-Ã -vis the yen as the crosses tested offers around the Â¥222.45 and Â¥94.25 levels, respectively. In Chinese news, Chinese financial markets will return to normal next week after this weekâ€™s National Day holiday period. The State Administration of Foreign Exchange today reported that Chinaâ€™s current account surplus totaled US$ 91.6 billion in the first half of the year. SAFE also reported the government will accelerate development of the FX market and said it will try to reduce its massive trade surplus in the beginning of this year. SAFE also noted the government plans to expand capital account convertibility in the second half of this year.
The British pound slumped vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 1.8725 level and was capped around the $1.8890 level. Technically, todayâ€™s intraday high was right around the 38.2% retracement of the move from $1.8600 to $1.9070. Data released in the U.K. today saw another good month for the manufacturing sector in August. Traders await U.K. economic data to determine how lower oil prices are impacting manufacturing input costs. Cable bids are cited around the $1.8710/ 1.8595 levels. The euro came off vis-Ã -vis the British pound as the single currency tested bids around the â‚¤0.6710 level and was capped around the â‚¤0.6765 level.
The Swiss franc depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.2615 level and was supported around the CHF 1.2490 level. Todayâ€™s intraday high was the pairâ€™s strongest showing since 27 April. Data released. Technically, todayâ€™s intraday low was right around the 61.8% retracement of the move from CHF 1.2620 to CHF 1.2290. Data released in Switzerland today saw the September unemployment rate print at an unchanged 3.1%. U.S. dollar offers are cited around the CHF 1.2735 level. The euro came off vis-Ã -vis the Swiss franc as the single currency tested bids around the CHF 1.5870 level while the British pound gained ground vis-Ã -vis the Swiss franc and tested offers around the CHF 2.3660 level.
The Australian dollar depreciated vis-Ã -vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7420 level and was capped around the $0.7485 level. Technically, todayâ€™s intraday low was just below the 38.2% retracement of the move from $0.7015 to $0.7790. Australian dollar bids are cited around the US$ 0.7385/ 10 levels.
The Canadian dollar appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the C$ 1.1200 figure and was capped around the C$ 1.1280 level. Technically, todayâ€™s intraday low was just above the 38.2% retracement of the move from C$ 1.1455 to C$ 1.1030. Data released in Canada today saw the September jobless rate slide to 6.4% from 6.5% in August with 31,000 new jobs created. U.S. dollar offers are cited around the C$ 1.1355 level.
The New Zealand dollar came off vis-Ã -vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6575 level and was capped around the $0.6655 level. New Zealand dollar offers are cited around the $0.6685 level.
Gold extended recent losses vis-Ã -vis the U.S. dollar today as the yellow metal tested bids around the US$ 560.58 level and was capped around the $574.30 level. Silver moved lower vis-Ã -vis the U.S. dollar as the pair tested bids around the $10.77 level and was capped around the $11.10 level.
Crude oil extended its recent sell-off vis-Ã -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for November delivery tested bids around the US$ 59.48 level and was capped around the $60.24 level. Many traders do not believe OPEC will effect a decrease in oil supply while market rumours are circulating that OPEC will convene on Monday to discuss such a policy. Traders continue to monitor geopolitical hotspots like Iran and Nigeria.
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