Friday November 10, 2006 - 16:06:21 GMT
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Forex and Commodity Market Commentary and Analysis (10 November 2006)
The euro gained ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2900 figure and was supported around the $1.2830 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.2460 to $1.2940 and today‚Äôs intraday high was right around the 61.8% retracement of the move from $1.3665 to $1.1640. Central bankers convened at a major monetary conference in Frankfurt today and Federal Reserve Chairman Bernanke was quoted as saying ‚ÄúAlthough a heavy reliance on monetary aggregates as a guide to policy would seem to be unwise in the US context, money growth may still contain important information about future economic developments,‚ÄĚ adding it was ‚Äúsensible‚ÄĚ for the Fed to monitor money growth. Traders await comments from European Central Bank Chairman Bernanke today. The ECB is widely seen as lifting interest rates by 25bps in December and the big question remains how hawkish the central bank will be in 2007. Eurozone data released today saw German October wholesale prices off 0.2% m/m and up 2.9% y/y while French Q3 GDP data were flat, below expectations of a +0.5% increase. Euro bids are cited around the US$ 1.2780 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•117.20 level and was capped around the ¬•117.95 level. Stops were reached below the ¬•117.35 level, representing the 23.6% retracement of the move from ¬•119.85 to ¬•116.55. Bank of Japan Governor Fukui spoke extensively today, saying ‚ÄúWhile reading all sort of risks, I will handle [interest rates] quickly and gradually. If we fail to adjust policy, worrying too much about the downside risk to the economy, we will, rather, create more risk. Raising the key interest rate gradually is in accordance with our scenario of economic growth, and it is not something that could pull the buds out of the fledgling economic recovery," Fukui told a parliamentary committee.‚ÄĚ Regarding the yen, he added ‚ÄúIn our country's case, if the yen-carry trade swelled too much, it might give the foreign exchange market some impact. Therefore, the BoJ is cautiously watching not only the pace of increase of yen-carry trades but also the pace of re-windings of such transactions.‚ÄĚ BoJ Deputy Governor Iwata noted there will be ‚Äúa gradual adjustment‚ÄĚ in interest rates ‚Äúif the economy moved along the lines we expect.‚ÄĚ Data released in Japan today saw September core machinery orders decline 7.4% m/m, much below expectations. The Nikkei 225 stock index lost 0.53% to close at ¬•16,112.43. Dollar bids are cited around the ¬•117.05/ 116.65 levels. The euro moved lower vis-√†-vis the yen as the single currency tested bids around the ¬•150.90 level and was capped around the ¬•151.30 level. The British pound moved marginally higher vis-√†-vis the yen as sterling tested offers around the ¬•225.00 figure while the Swiss franc weakened vis-√†-vis the yen and tested bids around the ¬•94.70 level. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.8645 in the over-the-counter market, down from CNY 7.8665, and at CNY 7.8663 in the exchange-traded market. People‚Äôs Bank of China Governor Zhou indicated the central bank has a plan to diversify its foreign exchange reserves but denied that China plans to accelerate this diversification. Data released in China today saw October producer price inflation up 2.9% y/y.
The British pound moved sharply higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9175 level and was supported around the $1.9050 level. Stops were hit above the $1.9090 level, representing the 76.4% retracement of the move from $1.9135 to $1.8945. The pair is now trading at its highest level since April 2005. Traders await many data in the U.K. next week including producer and consumer prices, retail sales, and Bank of England‚Äôs quarterly inflation report. Cable bids are cited around the US$ 1.9065 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6715 level and was capped around the ‚ā§0.6740 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2345 level and was capped around the CHF 1.2430 level. Technically, today‚Äôs high was right around the 38.2% retracement of the move from CHF 1.3235 to CHF 1.1920. Swiss National Bank board member Hildebrand spoke and said ‚ÄúIn the case of the SNB, the flexible nature of the policy framework and the importance attached to money and credit variables means that, in an effort to avoid potential long-term financial distortions from emerging, the governing board could conceivably tighten monetary policy even if our inflation forecast signals no imminent inflation threat.‚ÄĚ Dollar offers are cited around the CHF 1.2445/ 1.2505 levels. The euro moved higher vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.5915 level while the British pound gained ground vis-√†-vis the Swiss franc and tested offers around the CHF 2.3725 level.
The Australian dollar came off marginally vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7660 level and was capped around the $0.7690 level. Australian dollar bids are cited around the US$ 0.7610/ 0.7520 levels.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1320 level and was supported around the C$ 1.1265 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from C$ 1.1030 to C$ 1.1410. U.S. dollar offers are cited around the C$ 1.1355/ 1.1410 levels.
The New Zealand dollar gained marginal ground vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6665 level and was supported around the $0.6645 level. New Zealand dollar offers are cited around the US$ 0.6710 level.
Gold weakened vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 622.90 level and was capped around $ 636.60 level. Today‚Äôs intraday high represented a two-month high and the impetus was a comment from People‚Äôs Bank of China Governor Zhou who indicated the central bank may diversify its US$ 1 trillion foreign exchange reserve basket. Silver moved lower vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 12.90 level and was capped around the $13.20 level.
Crude oil slumped vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for December delivery tested bids around the US$ 60.17 level and was capped around the $61.11 level. An IEA forecast predicted Q4 supply may be tight but said 2006 global oil demand is likely to slow. OPEC next convenes on 14 December to consider additional output cuts.
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