Wednesday March 28, 2007 - 15:55:54 GMT
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Forex and Commodity Market Commentary and Analysis (28 March 2007)
The euro gained marginal ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3370 level and was supported around the $1.3325 level. Technically, today‚Äôs intraday high was just below the 76.4% retracement of the move from $1.3410 to $1.3255. Traders are weighing economic data against heightened geopolitical risks and testimony from Federal Reserve Chairman Bernanke. Data released in the U.S. today saw February durable goods orders rise 2.5% from a revised -9.3% in January. The ex-transportation component was off 0.1% and the ex-defense component was up 2.5%. Chicago Fed President Moskow spoke overnight and reiterated the ‚Äúrisk of inflation remaining too high is greater than the risk of growth falling too low‚ÄĚ but he did indicate the U.S. economy should expand below its long-term growth potential in 2007 with lingering downside risks to the housing market. In eurozone news, EMU-13 M3 money supply growth accelerated 10.0% y/y in February from a revised 9.9% in January. These data reinforce the belief the European Central Bank will continue to tighten monetary policy. ECB member Gonzalez-Paramo reiterated ‚Äúthe balance of inflation risks is clearly on the upside‚ÄĚ and added ‚Äúholding the line on wages is key.‚ÄĚ GfK reported its April consumer climate index printed at 4.4 from a revised 4.3 in March. Euro bids are cited around the US$ 1.3285 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•116.85 level and was capped around the ¬•118.00 figure. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from ¬•115.50 to ¬•118.50. The yen scored sizable gains across the board as traders reduced global risk on account of heightened geopolitical pressures, especially involving the hostage standoff between the United Kingdom and Iran. The yen is used as a funding vehicle in short yen carry trades in which proceeds are invested in the assets of higher yielding currencies. Traders await the release of February consumer price and industrial production data on Friday followed by the quarterly tankan survey on Monday. The Nikkei 225 stock index lost 0.64% to close at ¬•17,254.73. Dollar bids are cited around the ¬•116.65/ 25 levels. The euro weakened vis-√†-vis the yen as the single currency tested bids around the ¬•156.05 level and was capped around the ¬•157.55 level. The British pound and Swiss franc moved lower vis-√†-vis the yen as the crosses tested bids around the ¬•229.60 and ¬•96.50 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7295 in the over-the-counter market, down from CNY 7.7334. There were unconfirmed reports overnight that Chinese regulators are planning to issue warnings about investments into Chinese equities following strong recent performance. Data released in China today saw February consumer confidence fall to 95.8 from 96.3 in January and 96.9 in December.
The British pound gained marginal ground vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9680 level and was supported around the $1.9595 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.9180 to $1.9725. Traders continue to monitor developments involving the fifteen U.K. military personnel who were captured by Iran last week in Iraqi waters. One report today suggests the lone female solider may be released by Iran. Data released in the U.K. today saw Nationwide March house prices climb 0.4% m/m and 9.3% y/y, an indication that the Bank of England‚Äôs continued interest rate hikes may be slowing growth in the U.K. housing sector. Other data released today saw U.K. Q4 GDP growth revised down to 0.7% q/q from 0.8% q/q while the Q4 current account printed at -‚ā§12.7 billion. Cable bids are cited around the US$ 1.9595 level. The euro gained marginal ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6800 figure and was supported around the ‚ā§0.6785 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2080 level and was capped around the CHF 1.2140 level. Technically, today‚Äôs intraday low was just below the 23.6% retracement of the move from CHF 1.2770 to CHF 1.1875. Data released in Switzerland today saw the March KOF economic barometer rise to 1.90 from a revised 1.81 in February and 1.74 in January. The Swiss franc is benefiting from increase risk aversion related to the war games taking place off the Iranian coast. Dollar offers are cited around the CHF 1.2155 level. The euro and British pound depreciated vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6145 and CHF 2.3755 levels, respectively.
The Australian dollar came off vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8040 level and was capped around the US$ 0.8090 level. Technically, today‚Äôs intraday low was just above the 23.6% retracement of the move from $0.7795 to $0.8105. Many traders continue to expect that Reserve Bank of Australia will tighten monetary policy in April. Australian dollar bids are cited around the US$ 0.7990 level.
The Canadian dollar appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1555 level and was capped around the C$ 1.1610 level. GDP and earnings data will be released on Friday. U.S. dollar bids are cited around the C$ 1.1510 level.
Gold gained ground vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 669.25 level and was supported around the $663.85 level. The pair moved higher after tensions between Iran and the West deteriorated further overnight with rumours abound that Iran had fired on U.S. forces. Silver appreciated vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.48 level and was supported around the $13.25 level.
Crude oil extended recent gains vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for May delivery tested offers around the US$ 68.09 level and was supported around the US$ 62.96. The pair spiked right around the close of the North American session yesterday on rumours that Iranian forces fired upon the U.S. Navy. The standoff involving Iran‚Äôs kidnapping of fifteen U.K. military personnel does not show any signs of abating and crude prices may continue to appreciate as a result.
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