Monday February 5, 2007 - 16:52:17 GMT
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Forex and Commodity Market Commentary and Analysis (5 February 2007)
The euro moved lower vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2910 level and were capped around the $1.2965 level. Stops were reached below the $1.2925 level, representing the 50% retracement of the move from $1.2480 to $1.3365. The common currency came off after a media outlet cited ‚Äúwell-informed‚ÄĚ sources who reported the European Central Bank will likely keep interest rates unchanged after possibly tightening policy in March or April. Data released in the eurozone today saw the January purchasing managers‚Äô index improve to 57.9 from 57.2 in December, a six-month best. Most traders believe the ECB will keep rates unchanged on Thursday and will pay close attention to remarks from ECB President Trichet regarding the likelihood of another rate hike. In U.S. news, the January ISM non-manufacturing index improved to 59.0 from 56.7 in December. The non-manufacturing price index pulled back to 55.2 from a revised 59.7 in December while the non-manufacturing employment index settled lower at 51.8 and the new orders index ticked down to 55.4 from a revised 55.6 in December. Overall, these data continue to evidence expansion in the sector and follow a recent string of healthy U.S. economic data. Euro bids are cited around the US$ 1.2885 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•120.40 level and was capped around the ¬•121.15 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from ¬•118.00 to ¬•122.15. Speculation is increasing that the Group of Seven communiqu√© to be issued this weekend will include a reference to the yen‚Äôs weakness. European officials are said to favour discussion of the yen‚Äôs recent weakness while Japanese and U.S. officials are not overly concerned. IMM data confirm that net yen short positions held by speculators have expanded to another record US$ 17.8 billion in the week to 30 January from the week ending 23 January. These data suggest the yen is long overdue for a significant pullback and when that occurs, many short yen carry trades will be unwound. Ratings agency Moody‚Äôs indicated it sees further upgrades to Japanese corporate ratings in 2007 and this may stimulate some demand for Japanese assets. The Nikkei 225 stock index lost 1.15% to close at ¬•17,344.80. Dollar bids are cited around the ¬•120.10 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 ¬•157.00 figure. The British pound and Swiss franc depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•235.45 and ¬•96.30 levels, respectively. The Chinese yuan weakened vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7609 in the over-the-counter market, up from CNY 7.7560. People‚Äôs Bank of China Assistant Governor Yi Gang reported ‚Äúadditional measures to curb liquidity will be adopted.‚ÄĚ It was also announced that the National People‚Äôs Congress will convene its annual session on 5 March.
The British pound came off sharply vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9535 level and was capped around the $1.9665 level. Technically, today‚Äôs intraday low was right around 23.6% retracement of the move from $1.8515 to $1.9845. Data released in the U.K. today saw the January PMI services survey fall to 59.2 from December‚Äôs multi-year high of 60.6. Most traders believe Bank of England‚Äôs Monetary Policy Committee will keep interest rates unchanged on Thursday. Cable bids are cited around the US$ 1.9510 level. The euro gained marginal ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6615 level and was supported around the ‚ā§0.6585 level.
The Swiss franc weakened marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2515 level and was supported around the CHF 1.2470 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of the move from CHF 1.1285 to CHF 1.3285. The January consumer price index and January SECO consumer climate index will be released on Thursday. Dollar offers are cited around the CHF 1.2555 level. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6130 and CHF 2.4420 levels, respectively.
The Australian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7765 level and was supported around the $0.7725 level. Data released in Australia today saw the January performance of services index unchanged at 49.5 while December building approvals fall 1.9% m/m and December retail sales were up 0.3% m/m. Also, ANZ January job advertisements were off 0.1% m/m and up 21.8% y/y. Australian dollar bids are cited around the US$ 0.7700 figure.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1820 level and was capped around the C$ 1.1860 level. Canadian employment data will be released on Friday. U.S. dollar bids are cited around the C$ 1.1765 level.
Gold gained ground vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 652.20 level and was supported around the $646.45 level. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.52 level and was supported around the $13.27 level.
Crude oil moved higher vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for March delivery tested offers around the US$ 59.91 level and were supported around the $58.65 level. Bitterly cold temperatures in the U.S. Northeast added to the pair‚Äôs climb. A potential strike by Nigerian oil unions was suspended yesterday and Iran reported it will enter its next phase of nuclear development from 11 February.
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