Monday March 26, 2007 - 16:25:02 GMT
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Forex and Commodity Market Commentary and Analysis (26 March 2007)
The euro gained ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3345 level and was supported around the $1.3255 level. Technically, today‚Äôs intraday low was just above the 76.4% retracement of the move from $1.3365 to $1.2865. Data released in the U.S. today saw February new home sales off 3.9%, an improvement from January‚Äôs revised 15.8% decline, whole February building permits were unrevised at -2.5%. These data evidence the mixed housing data that continue to print in the U.S. but the volatility of these data should not be underestimated. Federal Reserve Chairman Bernanke testifies on Wednesday and is likely to weigh in on the U.S. housing sector and sub-prime U.S. mortgage market. Traders will also be curious to see if Bernanke comments on the Fed‚Äôs current policy stance, as most traders interpreted the Federal Open Market Committee‚Äôs announcement last week as being less hawkish than previous biases. Other data released in the U.S. today saw the Chicago Fed February national activity index print at +0.03, up from -0.72 in January. In eurozone news, European Union finance ministers will convene tonight and tomorrow and any comments they offer about exchange rates or monetary policy ‚Äď the European Central Bank‚Äôs domain ‚Äď will be closely watched. ECB member Bini-Smaghi hawkishly said the ECB ‚Äúmust point out the (inflation) risks, and we must act to eliminate these risks.‚ÄĚ Data released in France today saw the March business confidence indicator index rise to 109 from 108 in January, above expectations. Euro bids are cited around the US$ 1.3245 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•117.75 level and was capped around the ¬•118.40 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from ¬•115.15 to ¬•118.50. Bank of Japan Governor Fukui testified the central bank will maintain its accommodative monetary policy and said the government should have ‚Äúfinely tuned‚ÄĚ policies. Minutes from the February Bank of Japan Policy Board meeting were released overnight in which one policymakers said an April rate hike ‚Äúwould not be too late‚ÄĚ instead of the +25bps hike from a few weeks ago. Consumer price inflation data to be released on Friday will be closely watched to see if they move higher ‚Äď possibly giving the BoJ more ammunition to raise rates again this year. The Nikkei 225 stock index climbed 0.24% to close at ¬•17,521.96. Dollar bids are cited around the ¬•117.15 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•157.35 level and was supported around the ¬•156.30 level. The British pound and Swiss franc gained ground vis-√†-vis the yen as the crosses tested offers around the ¬•232.70 and ¬•97.15 levels, respectively. The Chinese yuan came off vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7382 in the over-the-counter market, up from CNY 7.7280. Data released in China today saw February retail sales climb 16.9% y/y, its fastest pace since May 2004. Standard Chartered reiterated a previous forecast that the yuan will appreciate some 4% this year. Lehman Brothers and HSBC see China‚Äôs economy expanding 9.8% and 10.0% this year, respectively.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9720 level and was supported around the $1.9570 level. Data released in the U.K. today saw March Hometrack house prices escalate higher by a near four-year record rate and these data evidence the resiliency of the U.K. housing market after Bank of England Monetary Policy Committee‚Äôs recent monetary tightenings. Cable bids are cited around the US$ 1.9635/ 1.9550 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6780 level and was supported around the ‚ā§0.6755 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2115 level and was capped around the CHF 1.2225 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from CHF 1.2350 to CHF 1.2035. Dollar offers are cited around the CHF 1.2210 level. The euro and British pound were little-changed vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6215 and CHF 2.4000 levels, respectively.
The Australian dollar extended recent gains vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8105 level and was supported around the $0.8030 level. Data released in Australia today saw the Q1 performance of manufacturing index decline to +6% from +17% in Q4. Westpac reported Reserve Bank of Australia believes additional monetary tightening will not hurt households. Many traders believe RBA will lift rates again as early as next month. Australian dollar bids are cited around the $0.8035 level.
The Canadian dollar lost ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1635 level and was supported around the C$ 1.1590 level. Technically, today‚Äôs intraday high was just below the 38.2% retracement of the move from C$ 1.1825 to C$ 1.1530. GDP data will be released on Friday. U.S. dollar bids are cited around the C$ 1.1510 level.
Gold appreciated vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 664.05 level and was supported around the $657.35 level. The U.S. dollar‚Äôs intraday sell-off contributed to gold‚Äôs gains, as did escalating geopolitical tensions involving Iran‚Äôs kidnapping of fifteen U.K. soldiers. Silver moved higher vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.39 level and was supported around the $13.18 level.
Crude oil moved higher vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for May delivery tested offers around the US$ 63.35 level and were supported around the $62.43 level. The United Nations Security Council voted to impose new sanctions against Iran over the weekend and Iran has already indicated it will not suspend its uranium nuclear enrichment activities. The U.K. continues to press for the release of fifteen Navy personnel that Iran kidnapped late last week.
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