Wednesday March 14, 2007 - 16:05:36 GMT
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Forex and Commodity Market Commentary and Analysis (14 March 2007)
The euro gained ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ $1.3215 level and was supported around the $1.3175 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.2910 to $1.3255 and today‚Äôs intraday high was right around the 76.4% retracement of the move from $1.3255 to $1.3070. Traders bought back some U.S. dollars today after data revealed that the U.S. current account balance narrowed in Q4 2006 to ‚ÄďUS$ 195.8 billion, its lowest quarterly level in more than one year but still around 5.8% of U.S. GDP. For all of 2007, the current account deficit aggregated US$ 856.7 billion, the fifth consecutive year it has established a record. Other data released today saw import prices rise 0.2% after falling 0.9% in January while prices were higher 1.3% y/y in February. Excluding petroleum, import prices were off 0.1% m/m in February and were up 2.1% y/y. The current turbulence in the U.S. equities market remains on traders‚Äô radar screens. Further deterioration in the U.S. sub-prime mortgage market will result in additional pressure on the Federal Reserve to reduce interest rates despite lingering inflationary pressures and the relative strength of the U.S. economy. In eurozone news, Q4 provisional employment was up 0.3% q/q and 1.6% y/y. Euro bids are cited around the US$ 1.3155 level.
The yen came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•116.75 level and was supported around the ¬•115.75 level. Technically, today‚Äôs intraday high is right around the 61.8% retracement of the move from ¬•121.40 to ¬•109.00. Data released in Japan today saw revised January industrial output off 1.7% m/m, down from the original print of -1.5% m/m. Many traders believe it is only a matter of time before dealers begin to unwind short yen carry trades en masse and this can lead to significant yen appreciation. One trade that traders are talking about is long yen/ short U.S. sub-prime mortgage risk. This is essentially an unwinding of the carry trade and if turbulence in the U.S. mortgage market continues, yen bulls may eye the ¬•115.60/ 20 levels. The Nikkei 225 stock index lost 2.92% to close at ¬•16,686.89. Dollar bids are cited around the ¬•115.60 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•154.00 figure and was supported around the ¬•152.65 level. The British pound and Swiss franc moved higher vis-√†-vis the yen as the crosses tested offers around the ¬•225.00 and ¬•95.75 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7380 in the over-the-counter market, down from CNY 7.7430, a post-revaluation low. Data released in China today saw February wholesale prices up 4.5% y/y while retail sales gained 14.7% y/y in January and February. People‚Äôs Bank of China Governor Zhou indicated the growth in China‚Äôs consumer price index has been ‚Äúcomparatively high‚ÄĚ in recent months and many traders believe the central bank could tighten monetary policy further.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9345 level and was supported around the $1.9210 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from $1.8090 to $1.9915. Data released in the U.K. today saw average earnings growth including bonuses rise 4.2% in the three months to January, up from 4.0% in the three months to December. Notably, January‚Äôs level was the highest level since August 2006. Also, the U.K. claimant count was down, further evidence of relative strength in the U.K. labour market. Cable bids are cited around the US$ 1.9280/ 45 levels. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6830 level and was capped around the ‚ā§0.6865 level.
The Swiss franc appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2140 level and was capped around the CHF 1.2195 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from $1.3235 to $1.1875. Data released in Switzerland today saw the ZEW March sentiment indicator decline to -28.0 points from -17.3 points in February. Most traders believe Swiss National Bank will lift interest rates by +25bps tomorrow. Dollar offers are cited around the CHF 1.2210 level. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6030 level while the British pound moved higher vis-√†-vis the Swiss franc and tested offers around the CHF 2.3530 level.
The Australian dollar climbed higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7875 level and was supported around the $0.7800 figure. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from $0.7980 to $0.7695. Data released in Australia today saw the March Westpac consumer sentiment index was up 3.7% m/m. Australian dollar bids are cited around the US$ 0.7790 level.
The Canadian dollar gained marginal ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1720 level and was capped around the C$ 1.1760 level. Data released in Canada today saw Q4 industrial production capacity decline to 82.5% from 83.4% in Q3. U.S. dollar bids are cited around the C$ 1.1660 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 639.05 level and was capped around the $645.65 level. Gold continues to pare recent gains as traders reassess global market risk and continue to sell commodities like gold to meet margin calls in other asset classes. Silver came off vis-√†-vis the U.S. dollar as the pair tested bids around the $12.62 level and was capped around the $12.84 level.
Crude oil weakened vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for April delivery tested bids around the US$ 57.56 level and was capped around the $58.39 level. Turmoil in global equity markets contributed to the pair‚Äôs sell-off. Most traders do not believe OPEC will reduce output levels when policymakers convene in Vienna tomorrow. Data released in the U.S. today saw EIA crude oil stocks rise by 1.2 million barrels in the week ending 9 March while distillates fell by 2.7 million barrels.
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