Thursday December 28, 2006 - 15:27:57 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (28 December 2006)
The euro rallied vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3200 figure and was supported around the $1.3105 level. Stops were hit above the $1.3185 level, representing the 76.4% retracement of the move from $1.3665 to $1.1640. Data released in the U.S. yesterday saw new home sales climb 3.4% m/m in November, exceeding expectations, while data released today saw November existing home sales climb 0.6% m/m while home prices fell for a record fourth consecutive month. Also, the December consumer confidence index improved to 109.0 from a revised 105.3 in November, the highest reading since April. Other data released today saw weekly initial jobless claims climb 1,000 to 317,000, less-than-expected. In eurozone news, European Central Bank member Merschâ€™s hawkish comments led to euro appreciation after he was quoted as saying EMU-12 interest rates remain low in historical terms. Euro bids are cited around the US$ 1.3185 level.
The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥118.55 level and was capped around the Â¥118.95 level. The pair moved lower after Bank of Japan Governor Fukui was quoted as saying consumption is increasing and the central bank will evaluate upcoming economic data in deciding when to move interest rates higher. Most traders believe the BoJ will lift the overnight call rate to 0.5% from its current 0.25% level by the end of the current fiscal year in March 2007. Data released in Japan overnight saw November housing starts climb 4.0% y/y, the fourth consecutive monthly climb, while November industrial output was up 0.7% m/m, below forecasts. The Nikkei 225 stock index gained 0.01% to close at Â¥17,224.81. Dollar bids are cited around the Â¥118.10 level. The euro moved higher vis-Ã -vis the yen as the single currency tested offers around the Â¥156.70 level and was supported around the Â¥155.65 level. The British pound and Swiss franc appreciated vis-Ã -vis the yen as the crosses tested offers around the Â¥233.60 and Â¥97.55 levels, respectively. The Chinese yuan appreciated vis-Ã -vis the U.S. dollar as the greenback closed at CNY 7.8141 in the over-the-counter market, down from CNY 7.8215. Peopleâ€™s Bank of China Vice Governor Wu Xiaoling reported the Federal Reserve is likely to begin reducing interest rates in 2007 and that this should help the yuan to strengthen. The Chinese government expected 2007 GDP growth to come in around 10% with the 2006 trade surplus and consumer price index at US$ 170 billion and 1.3% to 1.4%, respectively.
The British pound appreciated vis-Ã -vis the U.S. dollar today as cable tested offers around the US$ 1.9675 level and was supported around the $1.9555 level. Technically, todayâ€™s intraday high was right around the 23.6% retracement of the move from $1.9435 to $1.9745. Data released in the U.K. today saw Nationwide December house prices climb 1.2% m/m and 10.5% y/y. There is also anecdotal evidence that retail sales over the holiday period have been strong and this has reinforced the notion that Bank of England is likely to raise interest rates in Q1, most likely in February. Cable bids are cited around the US$ 1.9505/ 1.9460 levels. The euro gained marginal ground vis-Ã -vis the British pound as the single currency tested offers around the â‚¤0.6715 level and was supported around the â‚¤0.6700 figure.
The Swiss franc appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2165 level and was capped around the CHF 1.2270 level. Stops were hit below the CHF 1.2215 level, representing the 38.2% retracement of the move from CHF 1.2770 to CHF 1.1875. Dollar offers are cited around the CHF 1.2325 level. The euro and British pound weakened vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6050 and CHF 2.3910 levels, respectively.
Gold gained ground vis-Ã -vis the U.S. dollar today as the yellow metal tested offers around the US$ 635.67 level and was supported around the US$ 627.15 level. Liquidity was thin on account of the holiday week and time of year. Silver gained ground vis-Ã -vis the U.S. dollar as the pair tested offers around the US$ 12.91 level and was supported around the $12.76 level.
Crude oil climbed marginally vis-Ã -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for February delivery tested offers around the US$ 60.71 level and were supported around the $60.34 level. Traders await the release of weekly U.S. inventories data. Warmer-than-average temperatures in parts of the eastern U.S. are keeping a lid on prices.
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