Monday February 19, 2007 - 13:52:41 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (19 February 2007)
The euro came off marginally vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3120 level and was capped around the $1.3160 level. Technically, today‚Äôs intraday high was just above the 23.6% retracement of the move from $1.2480 to $1.3360. Liquidity is reduced today on account of the U.S. Presidents‚Äô Day holiday and China‚Äôs Lunar new year celebrations. Many Federal Reserve speakers are scheduled to offer remarks this week and dealers will look to them for amplification of Fed Chairman Bernanke‚Äôs sanguine remarks last week. In eurozone news, Germany‚Äôs Bundesbank released a report that predicts German economic growth may begin to improve following last month‚Äôs imposition of a higher value-added tax in that country. Euro bids are cited around the US$ 1.2925 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•119.70 level and was supported around the ¬•119.20 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from ¬•122.10 to ¬•118.95. Traders continue to speculate whether or not Bank of Japan will raise interest rates this week. Vice finance minister Fujii declined comment on what the government‚Äôs reaction will be if the BoJ tightens policy. Short yen carry trades have been receiving lots of attention over the past couple of months and one school of thought suggests that even if the BoJ lifts the overnight call rate by +25bps this week to 0.50%, the yen will still have a substantial negative interest rate differential vis-√†-vis most currencies and the yen could stay depressed. Another school of thought suggests the central bank will not lift rates higher until it sees an improvement in consumer spending. Data released in Japan today saw January department store sales unchanged m/m and flat year-over-year. As expected, the government maintained its assessment of the economy in its February economic report, noting there is ‚Äúsome weakness in consumption.‚ÄĚ Dollar bids are cited around the ¬•118.95 level. The euro gained marginal ground vis-√†-vis the yen as the single currency tested offers around the ¬•157.35 level and was supported around the ¬•156.85 level. The British pound weakened vis-√†-vis the yen as sterling tested bids around the ¬•232.10 level while the Swiss franc gained ground vis-√†-vis the yen and tested offers around the ¬•97.05 level. The Chinese yuan market will reopen after the Lunar holiday.
The British pound weakened vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9430 level and was capped around the $1.9565 level. A couple of factors contributed to sterling‚Äôs intraday weakness. First, the Rightmove February house price index climbed +0.9% m/m and +11.5% y/y, a decline of 2% from January‚Äôs 13.5% level. Second, the Bank of England reported a depreciation in the pound would be necessary to address the U.K.‚Äôs current account deficit. BoE‚Äôs Monetary Policy Committee also indicated some of the factors that have kept inflation at tolerable levels over the past few years are eroding. Cable bids are cited around the US$ 1.9340 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6755 level and was supported around the ‚ā§0.6725 level.
The Swiss franc came off marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2350 level and was supported around the CHF 1.2315 level. Dollar offers are cited around the CHF 1.2430 level. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6195 and CHF 2.3975 levels, respectively.
The Australian dollar came off vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7845 level and was capped around the $0.7885 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from $0.7615 to $0.7980. Traders await remarks from Reserve Bank of Australia Governor Stevens this week. Australian dollar bids are cited around the US$ 0.7795 level.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1660 level and was supported around the C$ 1.1630 level. U.S. dollar bids are cited around the C$ 1.1570 level.
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