Friday November 24, 2006 - 15:52:46 GMT
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Forex and Commodity Market Commentary and Analysis (24 November 2006)
The euro appreciated sharply vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3105 level and was supported around the $1.2945 level. The common currency reached its highest print since April 2005 and hit stops above the $1.9045 level, representing the 76.4% retracement of the move from $1.3665 to $1.1640. Euro bulls are eyeing the $1.3185 level as the pair‚Äôs next upside target. Remarks from an official from People‚Äôs Bank of China prompted massive dollar-selling. Better-than-expected German regional consumer price inflation did not have a major impact on the common currency with most market participants continuing to anticipate a move higher in rates by the European Central Bank next month. Liquidity in the North American session will be reduced today on account of some traders taking a long holiday weekend in the U.S. Euro bids are cited around the US$ 1.2960/ 1.2880 levels.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•115.55 level and was capped around the ¬•116.45 level. The pair reached its lowest level since August following the widespread dollar sell-off. Bank of Japan Deputy Governor Fukuma spoke overnight and said ‚ÄúWe will make our monetary policy decisions cautiously without holding any particular views in advance, while monitoring developments in the economy and prices in data-dependent fashion and keeping in touch with the market.‚ÄĚ He added ‚ÄúThe Japanese economy has shown a moderate but sustained expansion in line with the standard scenario in the (BoJ's semi-annual) outlook, backed by growth in both domestic and external demand.‚ÄĚ His remarks did not really clarify the central bank‚Äôs rate outlook and most traders continue to believe the central bank will tighten policy in Q1 2007. Capital flows data released today saw foreign investors as net buyers of Japanese equities for the first time in three weeks in the week to 18 November. The Nikkei 225 stock index lost 1.13% to close at ¬•15,734.60. Dollar bids are cited around the ¬•115.20/ 114.35 levels. The euro appreciated further vis-√†-vis the yen as the single currency tested offers around the ¬•151.60 level and was supported around the ¬•150.50 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•223.95 and ¬•95.80 levels, respectively. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar today as the greenback closed at CNY 7.8525 in the over-the-counter market, down from CNY 7.8620, and at CNY 7.8506 in the exchange-traded market. Today‚Äôs closes represent the pair‚Äôs lowest closes since China revalued the yuan last year. The big driver in the foreign exchange markets today involved comments from People‚Äôs Bank of China Vice Governor Wu Xiaoling who said east Asian currencies are at risk from the dollar‚Äôs depreciation, leading to more speculation that China‚Äôs will alter its massive US$ 1 trillion foreign reserves holdings. She added ‚ÄúTo what extent the yuan exchange rate should become more flexible should be agreed through thorough discussion and the reaching of a consensus. Increasing the flexibility of the exchange rate must stick to the principle of taking a gradual and controllable approach, on our own initiative. We must not rush.‚ÄĚ Data released in China today saw business conditions improve according to the November Business Survey.
The British pound appreciated sharply vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9350 level and was supported around the $1.9145 level. Cable reached levels not seen since the last week of 2004 despite data that saw Q3 GDP remain unrevised at 0.7% q/q while year-on-year growth was downwardly revised to 2.7% from 2.8%. Household spending slowed and industrial production was downwardly revised to 0.1% growth from 0.3% growth. Cable bids are cited around the US$ 1.9155 level. The euro gained ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6780 level and was supported around the ‚ā§0.6755 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2070 level and was capped around the CHF 1.2245 level. Stops were reached below the CHF 1.2230 level, representing the 23.6% retracement of the move from CHF 1.2235 to CHF 1.1920. Data released in Switzerland today saw September retail sales climb 2.3% y/y. Dollar offers are cited around the CHF 1.2180/ 1.2230 levels. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5810 and CHF 2.3340 levels, respectively.
Gold registered significant gains vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 639.80 level and was supported around the US$ 630.25 level. The major pullback in the U.S. dollar caused gold to move higher. Liquidity remains reduced in the North American session today. Silver gained ground vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.47 level and was supported around the $13.09 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested offers around the US$ 59.98 level and was supported around the $59.02 level. The big issue on traders‚Äô minds relates to the possibility of additional OPEC cuts next month when policymakers convene in Nigeria.
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