Tuesday November 14, 2006 - 15:43:09 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (14 November 2006)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2870 level and was supported around the $1.2800 figure. The common currency moved to intraday highs after the release of U.S. economic data that saw retail sales decline a smaller-than-expected 0.2% with the ex-autos component off 0.4% in October while headline wholesale inflation lessened by its largest amount in five years last month. The headline producer price inflation tally was off 1.6% while core producer prices were down 0.9%, their largest decline in more than thirteen years. Traders await this week‚Äôs consumer price inflation data to see if the pullback in wholesale inflation results in a deceleration in retail inflation. The eventual decline in core consumer prices will likely see the U.S. dollar weaken substantially as that will signal to traders that the Federal Reserve‚Äôs long-standing monetary tightening cycle is conclusively finished, as many expect now. In eurozone news, the German November ZEW economic expectations index fell to -28.5, around a thirteen-year low and below forecasts. Also, EMU-12 provisional Q3 GDP data were up 0.5% q/q and 2.6% y/y while German GDP expanded 0.6% q/q and 2.3% y/y. Additionally, German consumer prices gained 0.1% m/m and 1.1% y/y. Euro bids are cited around the US$ 1.2780 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•117.25 level and was capped around the ¬•118.15 level. The pair has been given for most of today‚Äôs session on account of a stronger-than-expected GDP print in the July ‚Äď September period, up +0.5% and an annualized 2.0%. The yen improved on this number as more traders anticipate Bank of Japan may lift interest rates next month. The central bank estimates there is more than US$ 100 billion in short yen carry trades in the market now and indications the BoJ will tighten policy will cause some of these trades to be unwound, resulting in a stronger yen. BoJ‚Äôs Policy Board convenes overnight to deliberate policy. The Nikkei 225 stock index gained 1.67% to close at ¬•16,289.55. Dollar bids are cited around the ¬•117.05/ ¬•116.65 levels. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•150.55 level and was capped around the ¬•151.35 level. The British pound and Swiss franc depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•222.75 and ¬•94.45 levels, respectively. The Chinese yuan came off marginally vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.8869 in the over-the-counter market, up from CNY 7.8867. Premier Wen called for ‚Äúconsultation and dialogue to settle bilateral economic and trade frictions.‚ÄĚ People‚Äôs Bank of China reiterated its estimates of GDP growth above 10% in 2006 along with consumer price inflation of around 1.5%. Also, October retail sales were up 14.3% y/y.
The British pound slumped vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.8955 level and was capped around the US$ 1.9050 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from $1.8670 to $1.9175 while stops were hit below the $1.8985 level, representing the 38.2% retracement of the same range. Data released in the U.K. today saw the October consumer price inflation rate remain unchanged at 2.4% and this is the sixth consecutive month the measure has been above Bank of England‚Äôs 2.0% target rate. Traders await the release of the quarterly BoE inflation report tomorrow for any clues about monetary policy. Some dealers believe the central bank may next lift rates in early 2007 after hiking them this month. BoE Governor King will also speak tomorrow. Cable bids are cited around the US$ 1.8925 level. The euro gained ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6770 level and was supported around the ‚ā§0.6730 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2470 level and was supported around the CHF 1.2385 level. There are no major Swiss data scheduled for release this week and most traders believe Swiss National Bank will tighten monetary policy by +25bps in December. Dollar offers are cited around the CHF 1.2505 level. The euro moved marginally higher vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.5955 level while the British pound came off vis-√†-vis the Swiss franc and tested bids around the CHF 2.3565 level.
The Australian dollar moved higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7675 level and was supported around the US$ 0.7620 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from $0.7985 to $0.7015. Data released in Australia today saw the NAB October business confidence index print at an unchanged +6.0 points. Australian dollar bids are cited around the US$ 0.7590 level.
The Canadian dollar came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1405 level and was supported around the C$ 1.1345 level. U.S. dollar offers are cited around the C$ 1.1455 level.
The New Zealand dollar appreciated vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6620 level and was supported around the $0.6585 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from $0.6750 to $0.6585. New Zealand dollar offers are cited around the US$ 0.6650/ 70 levels.
Gold fell marginally vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 622.40 level and was capped around the $629.10 level. Most traders believe the U.S. dollar will need to fall further if gold is to appreciate and some believe an appreciation in crude oil prices will also benefit the pair. Silver came off vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 12.80 level and was capped around the $12.99 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for December delivery tested offers around the US$ 59.08 level and was supported around the $58.35 level. Traders await tomorrow‚Äôs U.S. weekly inventories data to evaluate the current stockpile of crude reserves.
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