Thursday March 22, 2007 - 15:51:32 GMT
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Forex and Commodity Market Commentary and Analysis (22 March 2007)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3345 level and was capped around the $1.3410 level. The common currency today traded at its highest level since March 2005 and was inspired by yesterday‚Äôs Federal Open Market Committee interest rate announcement. The Fed kept the federal funds target rate unchanged at 5.25% and moved closer to a neutral bias from its long-standing tightening bias. The FOMC reported ‚ÄúThe Federal Open Market Committee decided today to keep its target for the federal funds rate at 5-1/4 percent. Recent indicators have been mixed and the adjustment in the housing sector is ongoing. Nevertheless, the economy seems likely to continue to expand at a moderate pace over coming quarters. Recent readings on core inflation have been somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures. In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information.‚ÄĚ Notably, the FOMC detailed possible ‚Äúadjustments‚ÄĚ to rates rather than a ‚Äúfirming‚ÄĚ in rates but it is clear the Fed is still more concerned with inflation than it is with slower growth. Traders will pay close attention to remarks from Fed Chairman Bernanke today along with other Fed policymakers. Data released in the U.S. today saw February leading economic indicators off 0.5% while weekly initial jobless claims were off 4,000 to 316,000 and continuing jobless claims were off 69,000 to 2,501,000. In eurozone news, German finance minister Steinbrueck called the German economic outlook for 2007 and 2008 ‚Äúvery good.‚ÄĚ Data released in the eurozone today saw the EMU-13 January trade balance at -‚ā¨7.8 billion compared with a +‚ā¨3.2 billion surplus in December. Also, EMU-13 January industrial new orders were off 0.2% m/m and up 12.0% y/y. Euro bids are cited around the US$ 1.3245 level.
The yen depreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•117.90 level and was supported around the ¬•117.20 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from ¬•115.15 to ¬•118.50. Data released in Japan overnight saw the February trade surplus climb 7.7% y/y to ¬•979.58 billion while February supermarket sales were down 1.6% y/y. Also, business sentiment in the January ‚Äď March quarter declined for the second consecutive quarter, falling to 6.2 from 6.4, while land prices rose for the first time in sixteen years in 2006. Bank of Japan Governor Fukui testified overnight and said the central bank can help the economy by keeping rates very low ‚Äúfor now.‚ÄĚ The Nikkei 225 stock index gained 1.49% to close at ¬•17,419.20. Dollar bids are cited around the ¬•116.65 level. The euro came off marginally vis-√†-vis the yen as the single currency tested bids around the ¬•156.80 level and was capped around the ¬•157.50 level. The British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses tested offers around the ¬•232.25 and ¬•97.30 levels, respectively. The Chinese yuan appreciated sharply vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7266 in the over-the-counter market, down from CNY 7.7340, a post-revaluation low.
The British pound gained ground vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9725 level and was supported around the US$ 1.9660 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.8835 to $1.9915. Data released in the U.K. today saw the CBI‚Äôs total manufacturing order book escalate to +8% in March from February‚Äôs +4 level, the highest reading since May 1995. The average prices balance rose to its highest level since March 1995 and the balance for the consumer goods sector reached its highest level since April 1990. These data evidence the continued recovery in the U.K. manufacturing sector. Also, February retail sales were up 1.4% m/m and 4.9% y/y. Chancellor Brown‚Äôs ‚Äúfiscally-neutral‚ÄĚ Budget for fiscal year 2007-2008 that was released yesterday includes ‚Äúmajor tax reforms‚ÄĚ including a 2% cut in income and corporate taxes. Cable bids are cited around the US$ 1.9635/ 1.9550 levels. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6775 level and was capped around the ‚ā§0.6810 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2140 level and was supported around the CHF 1.2075 level. Dollar offers are cited around the CHF 1.2155/ 85 levels. The euro came off vis-√†-vis the Swiss franc as the single currency tested bids around the CHF 1.6170 level while the British pound appreciated vis-√†-vis the Swiss franc and tested offers around the CHF 2.3880 level.
The Australian dollar came off marginally vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8055 level and was capped around the $0.8090 level. Today‚Äôs intraday high represents the pair‚Äôs strongest showing since December 1996. Many traders believe Reserve Bank of Australia may lift interest rates as early as next month. Australian dollar bids are cited around the US$ 0.7980 level.
The Canadian dollar came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1590 level and was supported around the C$ 1.1550 level. Technically, today‚Äôs intraday high was just above the 23.6% retracement of the move from C$ 1.1785 to C$ 1.1530. U.S. dollar bids are cited around the C$ 1.1450 level.
Gold gained marginal ground vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 666.80 level and was supported around the $662.70 level. The pair moved higher on softer rhetoric from the Federal Open Market Committee. Silver appreciated vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.49 level and was supported around the US$ 13.33 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for May delivery tested offers around the US$ 61.46 level and were supported around the $59.66 level. Stops were hit above the $60.90 level, representing the 76.4% retracement of the move from $62.49 to $56.17.
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