Wednesday January 17, 2007 - 15:16:11 GMT
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Forex and Commodity Market Commentary and Analysis (17 January 2007)
The euro came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2895 level and was capped around the $1.2940 level. Technically, the pair continues to orbit the $1.2930 level, representing the 50% retracement of the move from $1.2480 to $1.3365. Data released in the U.S. today saw December industrial production climb +0.4% m/m on the headline number and +0.2% m/m on the core number. On an annualized basis, the headline and core were up +1.1% and 2.0% y/y with the core rate representing the most acute annual gain since December 2005. The total annual gain of 1.1% in 2006, however, is the slowest gain since December 2001. Other data released in the U.S. today saw December industrial production come in hotter-than-expected at +0.4% while capacity utilization printed at +81.8%. Industrial production recovered from a downwardly revised -0.1% showing in November. Additionally, November Treasury International Capital inflows data saw net long-term portfolio flows into the U.S. recede to US$ 68.4 billion from October‚Äôs US$ 85.3 billion level. In eurozone news, EMU-12 harmonized inflation rose 1.9% y/y last month, unchanged from provisional estimates, while the eurozone notched a trade surplus of ‚ā¨3.1 billion in November, up from a revised ‚ā¨3.0 billion in October. Also, German consumer prices were up 1.7% y/y for all of 2006 after rising 0.8% m/m in December. Euro bids are cited around the US$ 1.2820 level.
The yen appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•120.35 level and was capped around the ¬•120.85 level. The pair reached its highest level since December 2005 before coming off. Japanese media reports cast further doubts that Bank of Japan‚Äôs Policy Board will lift the overnight call rate by +25bps to +0.50% tonight. Through yesterday, the overnight yen swaps market had been pricing in about an 80% chance that rates would be lifted tonight but that currently stands at about 30%. Data released in Japan today saw the November current account surplus surge 21.5% y/y to ¬•1.756 trillion while the December consumer confidence index fell to 45.9 from 48.7 in November, the first decline in three months. The Nikkei 225 stock index climbed 0.34% to close at ¬•17,261.35. Dollar bids are cited around the ¬•119.30 level. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•155.50 level and was capped around the ¬•156.20 level while the British pound moved higher vis-√†-vis the yen and tested offers around the ¬•237.30 level. The Swiss franc weakened vis-√†-vis the yen as the pair tested bids around the ¬•96.30 level. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar today as the greenback closed at CNY 7.7740 in the over-the-counter market, down from CNY 7.7900. Today‚Äôs close represents the pair‚Äôs weakest close since the yuan was revalued by People‚Äôs Bank of China in July 2005. China‚Äôs Ministry of Commerce published ‚Äď and then retracted ‚Äď a report overnight on its website that supported further appreciation of the yuan.
The British pound appreciated sharply vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9685 level and was supported around the US$ 1.9600 figure. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.9260 to $1.9705. Data released in the U.K. today saw average earnings ‚Äď excluding bonuses ‚Äď climb 3.7% y/y in the three months to November, below market expectations. Also, the U.K. claimant count fell for the third consecutive month, down 5,500 to 943,100, its lowest level since March 2006. Cable bids are cited around the US$ 1.9560 level. The euro depreciated vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6560 level and was capped around the ‚ā§0.6590 level.
The Swiss franc lost marginal ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2515 level and was supported around the CHF 1.2465 level. Dollar offers are cited around the CHF 1.2560 level. The euro and British pound gained ground vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6145 and CHF 2.4595 levels, respectively.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7870 level and was supported around the $0.7815 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $0.7980 to $0.7760. Data released in Australia today saw the Westpac November leading index up 6.0% y/y. Australian dollar bids are cited around the US$ 0.7795 level.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1730 level and was capped around the C$ 1.1770 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from C$ 1.1625 to C$ 1.1800. Traders are still talking about yesterday‚Äôs relatively hawkish interest rate statement from Bank of Canada after the central bank decided to keep interest rates unchanged at 4.25%. BoC expects CPI inflation to average just over 1.0% in H1 2007. U.S. dollar offers are cited around the C$ 1.1830 level.
The New Zealand dollar depreciated marginally vis-√†-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6885 level and was capped around the $0.6920 level. Technically, the pair continues to orbit the US$ 0.6895 level, representing the 76.4% retracement of the move from $0.7195 to $0.5925. Data released in New Zealand today saw the consumer price index decline 0.2% q/q in the three months to December with the annual inflation data down to 2.6% from 3.5% in the September quarter. New Zealand dollar bids are cited around the US$ 0.6870 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 627.20 level and was supported around the $620.60 level. Japanese demand continues to be cited in the wake of a weakening yen. Silver moved higher vis-√†-vis the yen as the pair tested offers around the US$ 12.68 level and was supported around the $12.38 level.
Crude oil depreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for February delivery tested bids around the $50.33 level and were capped around the $51.60 level. The International Monetary Fund revised its 2007 estimate for global oil prices to US$ 52.00 from its September forecast of $75.50. Saudi oil minister al-Naimi today said ‚Äúthere is no need to worry because the market is in a very healthy condition‚ÄĚ despite the commodity‚Äôs 18% sell-off this month. Many traders believe the pair will dip below the psychologically-important US$ 50.00 figure. Weekly U.S. energy inventories data will be released tomorrow.
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