Thursday March 1, 2007 - 16:31:13 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (1 March 2007)
The euro slumped further vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3165 level and was capped around the $1.3240 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from $1.3080 to $1.3255. Many data were released in the U.S. today. First, January personal income was up 1.0%, below expectations, while personal consumption exceeded expectations and was up +0.5%. Likewise, the personal consumption expenditures price index excluding food and energy was up 0.3% in January, up from December‚Äôs 0.1% climb. Second, the February ISM manufacturing survey improved to 52.3 from 49.3 in January, further evidence that the manufacturing sector is expanding moderately. Third, January construction spending was off 0.8% and weekly U.S. initial jobless claims were up 7,000 to 338,000. Fourth, Challenger reported U.S. February job cuts were up 33.4% m/m. Federal Reserve Chairman Bernanke yesterday indicated the financial markets seemed to be operating ‚Äúnormally‚ÄĚ and his comments helped to pacify the financial markets after Tuesday‚Äôs turbulent trading. In eurozone news, the EMU-12 PMI manufacturing survey edged up to 55.6 this month from 55.5 last month and provisional EMU-13 annual CPU was unchanged at 1.8%. This represents the sixth consecutive month that CPI has been below 2.0% but will likely not prevent the European Central Bank from tightening interest rates further in a week. Most traders believe the ECB will lift the main refinancing rate by +25bps. Euro bids are cited around the US$ 1.3125 level.
The yen appreciated sharply vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•116.95 level and was capped around the ¬•118.85 level. Stops were reached below the ¬•117.40 level, representing the 61.8% retracement of the move from ¬•114.45 to ¬•122.15. The pair resumed its freefall after a one-day reprieve yesterday and more short yen carry trades were unwound, taking the pair to levels not seen since December. MoF‚Äôs Watanabe said an unwinding of carry trades ‚Äď estimated in the tens of trillion yen ‚Äď could come ‚Äúat any time‚ÄĚ and added the Group of Seven‚Äôs recent statement that ‚Äúmarkets should recognize there is a two-way risk in the carry trade.‚ÄĚ Capital flows data released today saw foreigners purchase a net ¬•1.3 trillion of Japanese equities and bonds last week while Japanese investors sold a net ¬•233 billion of foreign stocks and bonds. These data are important because one of the main reasons for the yen‚Äôs appreciation has been Japanese investors‚Äô appetite for higher-yielding foreign securities. Tonight‚Äôs consumer price inflation data in Japan will be very important and any indication that price pressures are moving higher could lead to further yen appreciation. The Nikkei 225 stock index lost 0.86% to close at ¬•17,453.51. Dollar bids are cited around the ¬•116.25 level. The euro moved lower vis-√†-vis the yen as the single currency tested bids around the ¬•154.60 level and was capped around the ¬•157.25 level. The British pound and Swiss franc weakened vis-√†-vis the yen as the crosses tested bids around the ¬•229.45 and ¬•96.15 levels, respectively. The Chinese yuan came off vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7435 in the over-the-counter market, up from CNY 7.7435. Data released in China today saw the February PMI manufacturing survey improve to 53.0 from 52.0 in January. Chinese Premier Wen today reiterated his country will improve the yuan‚Äôs ‚Äúexchange rate formation mechanism and boost management and profitability of the country‚Äôs foreign exchange reserves.‚ÄĚ
The British pound depreciated vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9565 level and was capped around the $1.9650 level. Stops were hit below the $1.9585 level, representing the 50% retracement of the move from $1.9260 to $1.9915. Data released in the U.K. today saw the January M4 money supply up 0.9% m/m and 13.0% y/y, a fairly rapid pace of expansion that will put pressure on the Bank of England to tighten monetary policy further. Other data released today saw BoE report that January net mortgage lending was at its lowest level since September, an indication that the Monetary Policy Committee‚Äôs previous rate hikes may be slowing demand for housing finance. Additionally, the February manufacturing PMI survey printed at 55.4, the highest reading since July 2004. Moreover, CBI reported that the balance of retailers who expect prices to escalate over the coming three months was +19 last month, the highest level since May 1999. Cable bids are cited around the US$ 1.9510 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6715 level and was capped around the ‚ā§0.6750 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2235 level and was supported around the CHF 1.2145 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 February PMI survey print at 63.5, up from 62.0 in January. Dollar offers are cited around the CHF 1.2295 level. The euro and British pound moved lower vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6060 and CHF 2.3830 levels, respectively.
The Australian dollar depreciated vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7840 level and was capped around the $0.7880 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from $0.7980 to $0.7695. Data released in Australia today saw Q4 private new capital expenditures rise 1.0% compared with a 5.3% decline in Q3. Australian dollar bids are cited around the US$ 0.7805 level.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1745 level and was supported around the C$ 1.1670 level. Data released in Canada today saw the Q4 current account surplus fall to its lowest level in more than three years at C$ 2.99 billion. U.S. dollar bids are cited around the C$ 1.1655 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 677.30 level and was supported around the $666.15 level. Silver appreciated vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 14.34 level and was supported around the $14.08 level.
Crude oil gained ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil future for April delivery tested offers around the US$ 62.44 level and was supported around the $60.44 level. Data released in the U.S. yesterday saw distillate stocks fall by 3.8 million barrels, about double what was expected, and this has underpinned prices.
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