Monday March 19, 2007 - 15:26:32 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (19 March 2007)
The euro came off vis-Ã -vis the U.S. dollar today as the single currency tested bids around the US$ 1.3280 level and was capped around the $1.3325 level. Technically, todayâ€™s intraday low was just above the 23.6% retracement of the move from $1.3070 to $1.3340. All eyes are on the Federal Reserve this week as the Federal Open Market Committee convenes tomorrow and Wednesday to deliberate interest rates. Most traders do not expect any change in the federal funds target rate and as usual, dealers will be most interested in the Fedâ€™s policy statement. Producer and consumer prices data released last week confirm that price pressures remain elevated in the U.S. economy thus the Fed is likely to include language to that effect. The recent meltdown in the sub-prime mortgage market, however, has many traders thinking the FOMC will loosen monetary policy later this year and it remains to be seen if the FOMC will incorporate any references to the U.S. home credit market. Fed Chairman Bernanke and other Fed officials will speak on Thursday and their comments will be scrutinized, especially in light of this weekâ€™s rate decision, the mortgage market meltdown, and recent equity market volatility. Traders await todayâ€™s monthly survey from the National Association of Home Builders. Euro bids are cited around the US$ 1.3245 level.
The yen depreciated vis-Ã -vis the U.S. dollar today as the greenback tested offers around the Â¥117.60 level and was supported around the Â¥116.25 level. Technically, todayâ€™s intraday low was right around the 76.4% retracement of the move from Â¥114.45 to Â¥122.15. Bank of Japanâ€™s Policy Board began its two-day interest rate meeting and is not expected to change policy at this time. BoJ Governor Fukui is expected to reiterate the central bankâ€™s policy to hike rates gradually. Data released in Japan overnight saw February department store sales climb 1.7% y/y. The Nikkei 225 stock index gained 1.59% to close at Â¥17,009.55. Dollar bids are cited around the Â¥116.65/25 levels. The euro moved higher vis-Ã -vis the yen as the single currency tested offers around the Â¥156.30 level and was supported around the Â¥154.75 level. The British pound and Swiss franc appreciated vis-Ã -vis the yen as the crosses tested offers around the Â¥228.65 and Â¥97.25 levels, respectively. The Chinese yuan was unchanged vis-Ã -vis the U.S. dollar as the greenback closed at CNY 7.7360 in the over-the-counter market. Peopleâ€™s Bank of China lifted its benchmark lending rate by 27bps to 6.39% this weekend and lifted its deposit rate by 27bps to 2.79%.
The British pound gained ground vis-Ã -vis the U.S. dollar today as cable tested offers around the US$ 1.9470 level and was supported around the $1.9385 level. Technically, todayâ€™s intraday high was just above the 38.2% retracement of the move from $1.9915 to $1.9180. Data released in the U.K. today saw Rightmove March house prices up 1.5% m/m and 12.2% y/y. Traders await the release of the March Bank of England Monetary Policy Committee meeting minutes on Wednesday and are curious to see if they will yield any clues about additional monetary tightening. Traders also await Chancellor Brownâ€™s Budget statement on Wednesday and are monitoring reports that British bank Barclays may make a play for ABN AMRO. Cable bids are cited around the US$ 1.9355 level. The euro came off vis-Ã -vis the British pound as the single currency tested bids around the â‚¤0.6830 level and was capped around the â‚¤0.6865 level.
The Swiss franc weakened vis-Ã -vis the U.S. dollar today as the greenback tested offers around the CHF 1.2135 level and was supported around the CHF 1.2045 level. Traders await the release of February import and producer prices data tomorrow. Dollar offers are cited around the CHF 1.2210 level. The euro and British pound gained ground vis-Ã -vis the Swiss franc as the crosses tested offers around the CHF 1.6125 and CHF 2.3610 levels, respectively.
The Australian dollar gained ground vis-Ã -vis the U.S. dollar today as the Aussie tested offers just above the psychologically-important US$ 0.8000 figure and was supported around the $0.7935 level. The pair reached levels not seen since February 2004, bolstered by comments from Reserve Bank of Australia Deputy Governor Edey. Traders are now pricing in a 50% chance of a rate hike in June though some dealers see a move as early as next month. Australian dollar bids are cited around the US$ 0.7925 level.
The Canadian dollar appreciated marginally vis-Ã -vis the U.S. dollar today as the greenback tested bids around the C$ 1.1740 level and was capped around the C$ 1.1780 level. Data released in Canada today saw January wholesale trade fall 0.5% m/m while Canadian investors purchase a record C$ 7.8 billion in foreign securities in January, the 24th consecutive month that Canadians have been net buyers of foreign securities. Canada will reveal its fiscal year 2007-2008 federal budget later in the North American session. U.S. dollar bids are cited around the C$ 1.1695 level.
Gold appreciated vis-Ã -vis the U.S. dollar today as the yellow metal tested offers around the US$ 656.00 figure and was supported around the $652.10 level. The pair tracked oilâ€™s intraday gains higher. Silver moved higher vis-Ã -vis the U.S. dollar as the pair tested offers around the US$ 13.21 level and was supported around the $13.07 level.
Crude oil appreciated vis-Ã -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for May delivery tested offers around the US$ 59.96 level and were supported around the $59.20 level. The pairâ€™s upside was limited by Peopleâ€™s Bank of Chinaâ€™s monetary tightening overnight as trades expressed concern that a slower Chinese economy could reduce demand for energy.
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