Tuesday January 9, 2007 - 15:17:50 GMT
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Forex and Commodity Market Commentary and Analysis (9 January 2007)
The euro came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3000 figure and was capped around the $1.3050 level. Technically, today‚Äôs intraday high was right around the 76.4% retracement of the move from $1.3480 to $1.1640. Federal Reserve Vice Chairman Kohn spoke about the economy and took some wind out of the greenback‚Äôs sails when he reported recent inflation data are ‚Äúencouragingly consistent‚ÄĚ with the Fed‚Äôs forecast for a gradual decline. Despite his forecast for a moderation in growth and inflation, Kohn reiterated there is no guarantee that core inflation will continue to ease. Many traders believe he was trying to diminish the market‚Äôs perception that the Fed will lower interest rates this year. In eurozone news, the common currency was sold on speculation that Norges Bank, also known as Bank of Norway, will lift interest rates on account of higher retail sales and improving jobs data, lessening demand for euros. Data released in the eurozone today saw German industrial output up 1.8% m/m while Germany‚Äôs trade surplus expanded to ‚ā¨18.5 billion from an upwardly revised ‚ā¨17.4 billion in October. Most traders expect the European Central Bank will keep borrowing costs unchanged on Thursday and will closely scrutinize comments from ECB President Trichet to determine when the central bank is likely to tighten monetary policy next. Euro bids are cited around the US$ 1.2925 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•119.35 level and was supported around the ¬•118.65 level. Technically, today‚Äôs intraday low was just above the 76.4% retracement of the move from ¬•119.85 to ¬•114.45 and stops were hit above the ¬•119.30 level in the North American session, representing the 76.4% retracement of the move from ¬•119.70 to ¬•118.00. Japanese finance minister Omi said he expects the economy to surge in the summer around the time of elections in the upper house of parliament. Many traders now expect Bank of Japan to lift its overnight call rate at its 17-18 Policy Board meeting by +25bps to 0.50%. Dealers, however, believe the yen will remain a popular funding currency for carry trades, meaning short yen positions are unlikely to be unwound en masse. Any indication from BoJ Governor Fukui or other policymakers that the central bank will remain hawkish after its next interest rate hike could result in yen appreciation. The Nikkei 225 stock index gained 0.86% to close at ¬•17,237.77. Dollar bids are cited around the ¬•118.45 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•155.40 level and was supported around the ¬•154.65 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•231.85 and ¬•96.35 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.8050 in the over-the-counter market, down from CNY 7.8170. Data released in China today saw the Q4 business climate index gain 7.7 index points y/y.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9455 level and was supported around the $1.9375 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from $1.8835 to $1.9845. Data released in the U.K. today saw the BRC‚Äôs like-for-like retail sales index up 2.5% y/y. Also, a survey indicated wage inflation accelerated further last month with demand for permanent staff rising to a 33-month high. Most traders believe Bank of England‚Äôs Monetary Policy Committee will not change interest rates on Thursday and will instead opt for another hike next month. Cable bids are cited around the US$ 1.9340 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6695 level and was capped around the ‚ā§0.6720 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2420 level and was supported around the CHF 1.2335 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from CHF 1.2770 to CHF 1.1875. Dollar offers are cited around the CHF 1.2520 level. The euro and British pound moved higher vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6145 and CHF 2.4110 levels, respectively.
The Australian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7835 level and was supported around the $0.7790 level. Data released in Australia today saw November retail sales rose 0.2% m/m. Also, Dun & Bradstreet released a survey today for Q1 2007 that predicts inflation pressures will remain in the Australian economy with sales and profits moving lower. Australian dollar bids are cited around the US$ 0.7755 level.
The Canadian dollar came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1795 level and was supported around the C$ 1.1730 level. Data released in Canada today saw new housing starts off 7.8% in December. A Bank of Canada quarterly business outlook survey released yesterday showed businesses expect sales to improve in 2007 even as the economy is expected to decelerate. U.S. dollar offers are cited around the C$ 1.1830 level.
The New Zealand dollar spun higher vis-√†-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6940 level and was supported around the $0.6890 level. New Zealand dollar bids are cited around the $0.6870 level.
Gold slumped vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 606.27 level and was capped around the $614.05 level. The U.S. dollar‚Äôs resurgence during the North American session pulled the pair lower. An anticipated portfolio rebalancing by Dow Jones AIG ‚Äď the world‚Äôs second-largest commodity index fund with around US$ 30 billion in assets ‚Äď could see some gold futures contracts sold. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 12.46 level and were supported around the $12.22 level.
Crude oil came off vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for February delivery tested bids around the US$ 53.93 level and were capped around the $56.15 level. Warm weather in the northeastern United States contributed to the price decline. Traders are also keeping an eye on Somalia where the U.S. military is said to be battling Arab extremists.
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