Thursday January 18, 2007 - 16:48:35 GMT
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Forex and Commodity Market Commentary and Analysis (18 January 2007)
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The euro moved higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2975 level and was supported around the $1.2895 level. Technically, today’s intraday high was right around the 61.8% retracement of the move from $1.3050 to $1.2865. Many data were released in the U.S. today. First, the headline December consumer price index printed at +0.5% m/m while the core rate was up +0.2% m/m and 2.6% y/y. These data were consistent with expectations and will likely not provide the Federal Reserve with enough comfort to move to neutral from its current tightening stance. Second, December housing starts were up 4.5% to an annualized rate of 1.642 million units while December building permits expanded 5.5%/. Also, weekly initial jobless claims were off 8,000 to 290,000, much lower than expected, while continuing jobless claims were up 120,000 to 2.53 million. The Fed’s monthly Beige Book was released yesterday and reported “economic activity expanded at a moderate pace.” The Federal Open Market Committee convenes on 30-31 January to deliberate interest rates. St. Louis Fed President Poole yesterday characterized monetary policy as “well positioned.” Fed Chairman Bernanke is testifying before Congress today about budgetary issues and his comments are being scrutinized by the markets. In eurozone news, the European Central Bank’s monthly bulletin reiterated that it has a “very close monitoring of all developments…to ensure that euro zone inflation remains under control.” Germany’s HWWI institute lifted its 2007 GDP forecast to 1.7% from 1.1%. Euro bids are cited around the US$ 1.2885 level.
¥/ CNY
The yen extended recent losses vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥121.55 level and was supported around the ¥120.45 level. The pair reached its highest level since March 2003 after Bank of Japan’s Policy Board voted six-to-three to keep the overnight call rate target unchanged at +0.25%. The central bank also left its assessment of the economy mostly unchanged and BoJ Governor Fukui reported “"(An) extremely accommodative monetary environment will be sustained for the time being. We will adjust interest rates to harmonize (them) to economic fundamentals ... subject to developments in prices and (the) economy. We will take policy action only subject to developments in prices and the economy. We never take action by presetting a schedule on what action we will take in the future.” Data released in Japan overnight saw the November tertiary index off 0.3% m/m, the first decline in two months, while the November leading index was downwardly revised to 18.2 from 20.0. Also, December department store sales were off 2.3% y/y and December Tokyo-area condominium sales were up 1.5% y/y. Capital flows data released overnight saw foreign investors as net buyers of Japanese equities in the week to 13 January. The Nikkei 225 stock index climbed 0.63% to close at ¥17,370.93. Dollar bids are cited around the ¥120.70/ 20 levels. The euro appreciated vis-à-vis the yen as the single currency tested offers around the ¥157.35 level and was supported around the ¥155.95 level. The British pound and Swiss franc appreciated vis-à-vis the yen as the crosses tested offers around the ¥240.05 and ¥97.45 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.7710 in the over-the-counter market, down from CNY 7.7740, its lowest closing price since the yuan’s revaluation in July 2005.
₤
The British pound moved higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9775 level and was supported around the $1.9635 level. Technically, today’s intraday low was right around the 76.4% retracement of the move from $1.9750 to $1.9260. CML mortgage data released today saw mortgage lending total ₤29.4 billion in December, a new records high for that month. Bank of England Monetary Policy Committee member Tim Besley indicated he expects a skilled labour shortage in the services sector is likely to drive up wages. Many traders now believe the BoE will tighten interest rates next month following last week’s surprise rate hike. Also, BCC reported several measures of the U.K. manufacturing sector are at their highest levels since 1994. Cable bids are cited around the US$ 1.9620 level. The euro came off marginally vis-à-vis the British pound as the single currency tested bids around the ₤0.6555 level and was capped around the ₤0.6575 level.
CHF
The Swiss franc came off marginally vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2545 level and was supported around the CHF 1.2430 level. Data released in Switzerland today saw November retail sales rise 3.3% y/y. Dollar offers are cited around the CHF 1.2580 level. The euro and British pound moved higher vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.6200 and CHF 2.4690 levels, respectively.
C$
The Canadian dollar weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1770 level and was supported around the C$ 1.1715 level. Technically, today’s intraday high was right around the 50% retracement of the move from C$ 1.1625 to C$ 1.1800. Data released in Canada today saw November shipments of manufactured goods climb 2.3% m/m. U.S. dollar offers are cited around the C$ 1.1800 figure.
Gold/ Silver
Gold moved higher vis-à-vis the U.S. dollar today as the yellow metal tested offers around the US$ 636.30 level and was supported around the $631.02 level. Traders bought the pair on news that India’s Securities and Exchange Board have permissioned the launch of two gold exchange-traded funds. Silver weakened vis-à-vis the U.S. dollar as the pair tested bids around the US$ 12.71 level and was capped around the $12.97 level.
Crude Oil
Crude oil extended its recent slump vis-à-vis the U.S. dollar today as the light, sweet NYMEX crude oil futures for March delivery tested bids around the US$ 51.12 level and were capped around the $53.54 level. U.S. weekly EIA crude inventories data released today saw a 6.3 million barrel increase in stockpiles. Saudi Arabian oil minister al-Naimi today said his country will boost output capacity to meet escalating demand.
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