Thursday December 7, 2006 - 16:08:15 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (7 December 2006)
The euro climbed marginally vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3325 level and was supported around the $1.3275 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from $1.3360 to $1.3255. Data released in the U.S. today saw weekly initial jobless claims fall 34,000 to 324,000 while continuing claims rose 57,000 to 2.52 million, the highest level since late January. All eyes will be focused on tomorrow‚Äôs November non-farm payrolls report in the U.S. to see how healthy the employment situation remains in the U.S. The economy is already at or near full employment and this week‚Äôs ADP jobs report gave traders some confidence that payrolls numbers will increase tomorrow with possible upward revisions to previous months‚Äô tallies. In eurozone news, the European Central Bank raised its benchmark refinancing rate by +25bps to a five-year high of 3.50%, as expected. ECB President Trichet noted borrowing costs remain very low but added growth and inflation are likely to be lower in 2007. Euro bids are cited around the US$ 1.3225 level.
The yen gained marginal ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•114.75 level and was capped around the ¬•115.35 level. The pair briefly traded above the 38.2% retracement of the move from ¬•116.55 to ¬•114.45. Data released in Japan overnight saw the country‚Äôs foreign exchange reserves reach US$ 896.95 billion at the end of November, the ninth consecutive monthly record and up from October‚Äôs level of US$ 885.55 billion. Capital flows data saw foreign investors as net buyers of Japanese equities in the week to 2 December. The Nikkei 225 stock index climbed 0.62% to close at ¬•16,473.36. Dollar offers are cited around the ¬•115.75 level. The euro came off marginally vis-√†-vis the yen as the single currency tested bids around the ¬•152.60 level and was capped around the ¬•153.25 level. The British pound and Swiss franc moved lower vis-√†-vis the yen as the crosses tested bids around the ¬•225.85 and ¬•96.05 levels, respectively. The Chinese yuan came off marginally vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.8236 in the over-the-counter market, up from CNY 7.8234. People‚Äôs Bank of China today reported that it will improve the yuan‚Äôs exchange rate regime and strengthen financial controls in 2007. The government reported export growth is expected to recede to 14.9% from 26.7% this year. Referring to exchange rates, PBOC reported ‚ÄúIf the US current account deficit growth continues to be higher than GDP growth, the investment value of US assets will be questioned by global investors, and the willingness of investors to continue holding and buying US financial products may weaken. If the external capital stops flowing into the US, the US dollar may face a significant slide. Along with that there would be a decline in (domestic) consumption and investment as well as interest rate increases and financial market turbulence.‚ÄĚ
The British pound extended its recent move lower vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9625 level and was capped around the $ 1.9710 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from $1.9305 to $1.9845. As expected, Bank of England‚Äôs Monetary Policy Committee kept its benchmark repo rate unchanged at 5.00% today. Last month‚Äôs quarterly inflation report has many traders believing interest rates will be on hold for some time. Data released in the U.K. today saw the Halifax house price index climb 1.7% m/m and 9.6% y/y. Also, NIESR today reported GDP growth pull back slightly in the three months to November. Cable bids are cited around the US$ 1.9575/ 10 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6770 level and was supported around the ‚ā§0.6750 level.
The Swiss franc appreciated slightly vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1915 level and was capped around the CHF 1.1965 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from CHF 1.2115 to CHF 1.1875. Data released in Switzerland today saw the November unemployment rate remain steady at 3.1%. Dollar offers are cited around the CHF 1.2050 level. The euro and British pound weakened vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.5870 and CHF 2.3445 levels, respectively.
The Australian dollar appreciated sharply vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7910 level and was supported around the $0.7835 level. Data released in Australia today saw the November unemployment rate print at 4.6%, unchanged from October‚Äôs tally. Australian dollar bids are cited around the US$ 0.7755 level.
The Canadian dollar came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1505 level and was supported around the C$ 1.1460 level. November housing starts data will be released tomorrow. U.S. dollar offers are cited around the C$ 1.1570 level.
The New Zealand dollar appreciated vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6920 level and was supported around the US$ 0.6845 level. As expected, Reserve Bank of New Zealand kept its official cash rate unchanged at 7.25. RBNZ Governor Bollard reported ‚ÄúEconomic activity has been stronger than expected, given the resilience in domestic demand, and medium-term inflation risks appear weighted to the upside.‚ÄĚ New Zealand dollar bids are cited around the US$ 0.6825 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 625.52 level and was capped around the $ 632.50 level. Silver came off marginally vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 13.49 level and was capped around the $ 13.70 level.
Crude oil moved lower vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested bids around the US$ 61.55 level and was capped around the $ 62.48 level. An attack on oil workers in Nigeria led to brief intraday gains. Traders sold the pair further on an expected uptick in temperatures in parts of the U.S. and lingering doubts over OPEC‚Äôs resolve to reduce supplies further on 14 December.
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