Wednesday January 10, 2007 - 15:45:48 GMT
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Forex and Commodity Market Commentary and Analysis (10 January 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2950 level and was capped around the US$ 1.3005 level. The common currency has now come off about 350 pips since the beginning of the year. The move lower today was hastened after the release of U.S. November trade deficit data that saw the trade gap recede to US$ 58.23 billion from October‚Äôs US$ 58.8 billion, its lowest showing since July 2005. Notably, the U.S.‚Äôs deficit with China fell for the first time in four months but on a year-to-date basis, the U.S.‚Äôs trade gap with China stood at a record US$ 213.5 billion. Traders await comments from Chicago Fed President Moskow later in the day. In eurozone news, most traders expect European Central Bank to not tighten monetary policy tomorrow and instead opt for another rate hike later in Q1. Comments from ECB President Trichet will be closely scrutinized tomorrow after the ECB‚Äôs rate decision is announced. Data released in the eurozone today saw the November trade deficit print at ‚ā¨2.834 billion while November industrial output was off 0.2% m/m. Euro bids are cited around the US$ 1.2885 level.
The yen weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•119.70 level and was supported around the ¬•119.15 level. Today‚Äôs intraday high is the pair‚Äôs strongest showing since 16 October 2006 and dealers cite options-related selling pressure ahead of the psychologically-important ¬•120.00 figure. Bank of Japan official Hayakawa reported the Japanese economy ‚Äúcontinues to grow moderately‚ÄĚ and many traders now believe the central bank may raise interest rates next week for the second time in a year by lifting the overnight call rate by +25bps to 0.50%. Data released in Japan today saw foreign investors remain net buyers of Japanese equities for the seventh consecutive week in the week to 30 December. The Nikkei 225 stock index lost 1.71% to close at ¬•16,942.40. Dollar bids are cited around the ¬•118.95/ 60 levels. The euro moved lower vis-√†-vis the yen as the single currency tested bids around the ¬•154.60 level and was capped around the ¬•155.25 level. The British pound gained marginal ground vis-√†-vis the yen as sterling tested offers around the ¬•231.75 level while the Swiss franc came off vis-√†-vis the yen and tested bids around the ¬•95.85 level. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.8071 in the over-the-counter market, up from CNY 7.8050. Data released in China today saw the 2006 trade surplus print around US$ 177.47 billion, up from 2005‚Äôs level of US$ 102 billion.
The British pound weakened vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9325 level and was capped around the $1.94209 level. Stops were reached below the $1.9340 level, representing the 38.2% retracement of the move from $1.8515 to $1.9845. Data released in the U.K. today saw Nationwide consumer confidence recede in December to 83 while the present situation, expectations, and spending sub-indices all came off. Other data released in the U.K. today saw the November trade deficit widen to -‚ā§7.2 billion from a revised -‚ā§6.6 billion in October. Most traders believe Bank of England‚Äôs Monetary Policy Committee will not lift interest rates tomorrow though many traders foresee the MPC hiking rates by +25bps next month. Cable bids are cited around the US$ 1.9220/ 1.9180 levels. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6690 level while the pair was capped around the ‚ā§0.6705 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2475 level and was supported around the CHF 1.2400 figure. Today‚Äôs intraday high represents the pair‚Äôs strongest showing since 17 November. It was announced that Switzerland will join the Financial Stability Forum of major industrialized central banks, finance ministries, and regulatory authorities. Dollar offers are cited around the CHF 1.2520/ 75 levels. The euro came off marginally vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6110 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.4130 level.
The Australian dollar depreciated vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7760 level after running out of steam around the $0.7810 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from $0.7985 to $0.7015. Data released in Australia today saw the Westpac January consumer sentiment index improve to 114.0 while the November trade deficit printed at ‚ÄďA$ 843 million, down from October‚Äôs tally of ‚ÄďA$ 1.508 billion. Australian dollar bids are cited around the US$ 0.7700 figure.
The Canadian dollar came off marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1790 level and was supported around the C$ 1.1750 level. Data released in Canada today saw the November merchandise trade surplus widen to C$ 4.7 billion from C$ 3.8 billion in October. U.S. dollar offers are cited around the C$ 1.1830 level.
Gold weakened vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 606.40 level and was capped around the $614.20 level. The U.S. dollar‚Äôs strong showing today contributed to gold‚Äôs pullback but some gold bulls have been citing physical demand above the US$ 600.00 figure. Silver weakened vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 12.21 level and was capped around the $12.53 level.
Crude oil extended recent losses vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for February delivery tested bids around the US$ 54.10 level and were capped around the $55.83 level. Crude has now traded at these lows since June 2005. Venezuela‚Äôs announcement that it will nationalize some industries and major oil projects are weighing on oil as is the ongoing spat between Russia and Belarus.
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