Wednesday February 28, 2007 - 15:31:01 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (28 February 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3180 level and was capped around the $1.3240 level. Technically, today‚Äôs intraday high was just below the 76.4% retracement of the move from $1.3365 to $1.2865. Traders are still talking about yesterday‚Äôs large-scale sell-off across the board. Some cite lessening profit margins and former Federal Reserve Chairman Greenspan‚Äôs comments as a couple of reasons why U.S. assets faltered, along with the sell-off in overseas asset markets. Additionally, heightening geopolitical risks are weighing heavily on some markets, especially as Iran declared it is ‚Äúready for war.‚ÄĚ One measure of yesterday‚Äôs volatility is the CBOE VIX futures contract that finished 64.2% higher yesterday over Monday‚Äôs close. Another unsettling statistic was released yesterday in which it was reported that margin debt in U.S. equity markets reached a new record of US$ 285 billion, eclipsing the previous record from March 2000. Traders will closely monitor comments from Fed Chairman Bernanke today. Data released in the U.S. today saw Q4 gross domestic product increase at an annualized 2.2%, down from the initial estimate of 3.5%. Other data released today saw the NAPM New York business conditions index improve this month from January‚Äôs level while January existing home sales were off 16.6%, down from December‚Äôs 9.1% gain. In eurozone news, European Central Bank member Weber was quoted as saying the EMU-13 economy doesn‚Äôt need an accommodative monetary policy any further and that monetary stimulus most continue to be removed. Most traders believe the ECB will lift borrowing costs next week. Data released in the eurozone today saw EMU-13 consumer price inflation recede to 1.8% from 1.9% in December. Also, it was reported that the EMU-13 January unemployment rate fell to 7.4% from 7.5% in December while the German unemployment rate ticked down to 10.1%. Moreover, the EMU-13 February economic sentiment indicator improved to 109.7 from 109.2 in January. Euro bids are cited around the US$ 1.3115 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•118.70 level and was supported around the ¬•117.90 level. Technically, today‚Äôs intraday high was right around the 38.2% retracement of yesterday‚Äôs massive sell-off in which many short yen carry trades were unwound, driving the pair lower by a couple of big figures. One-month yen volatility rose significantly after yesterday‚Äôs move and reached a seven-month high of 8.75%. Data released in Japan overnight saw January retail sales off 0.8% y/y, the third consecutive monthly decline, while January industrial output was off 1.5% m/m. Also, January orders received by the 50 largest contractors were up 33.9% y/y and January housing starts were off 0.7% y/y, below forecasts. The all-important consumer price inflation will be released on Friday and could drive the yen higher, particularly if there is evidence that price pressures are accumulating. The Nikkei 225 stock index lost 2.85% to close at ¬•17,604.12. Dollar bids are cited around the ¬•117.15 level. The euro came off marginally vis-√†-vis the yen as the single currency tested offers around the ¬•156.90 level and was supported around the ¬•155.85 level. The British pound moved higher vis-√†-vis the yen as sterling tested offers around the ¬•233.00 figure while the Swiss franc came off vis-√†-vis the yen and tested bids around the ¬•96.70 level. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7405 in the over-the-counter market, down from CNY 7.7415. The government confirmed 2006 GDP remains unrevised at 10.7% and Chinese Premier Wen Jiabao said the government is working to ensure the country‚Äôs ‚Äúfinancial stability and safety‚ÄĚ after the massive 9% slide in Chinese equity markets yesterday.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9515 level and was capped around the $1.9645 level. Technically, today‚Äôs intraday low was just above the 61.8% retracement of the move from $1.9260 to $1.9915. Data released in the U.K. today saw Nationwide February house prices up 0.7% m/m and up 10.2% y/y. Also, GfK‚Äôs main headline consumer confidence index fell to -8 from -7 in January for the U.K.‚Äôs general economic situation. Cable bids are cited around the US$ 1.9415 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6730 level and was capped around the ‚ā§0.6755 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2240 level and was supported around the CHF 1.2170 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from CHF 1.2550 to CHF 1.2140. Data released in Switzerland today saw the KOF economic barometer rise to 1.79 in February from a revised 1.74 in January and 1.75 in December. Dollar offers are cited around the CHF 1.2295 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6105 level and was capped around the CHF 1.6140 level. The British pound moved higher vis-√†-vis the Swiss franc as sterling tested offers around the CHF 2.3965 level and was supported around the CHF 2.3855 level.
The Australian dollar was little-changed vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7855 level and was capped around the $0.7890 level. Data released in Australia today saw January private sector credit growth up 1.3% m/m and 14.9% y/y. Australian dollar bids are cited around the US$ 0.7840 level.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1720 level and was supported around the C$ 1.1655 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from C$ 1.1770 to $1.0925. U.S. dollar bids are cited around the C$ 1.1640 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 677.25 level and was supported around the $661.75 level. Traders lifted the pair from one-week lows today after yesterday‚Äôs extreme volatility in the global financial markets. Silver weakened vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 14.03 level and was capped around the $14.41 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for April delivery tested offers around the US$ 61.44 level and were supported around the $59.95 level. Traders continue to monitor tensions between Iran and the United Nations and await today‚Äôs weekly U.S. energy inventory data.
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