Friday August 20, 2004 - 15:09:17 GMT
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Forex Market News and Commentary (20 August 2004)
The euro moved to intraweek lows vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2280 level, its lowest level in one week. Strong stops were hit below the $1.2360 level during European dealing after the common currency failed to get above the $1.2385 level during Australasian dealing. Data released in the eurozone today saw an EMU-12 June trade balance surplus of €8.7 billion while direct and portfolio net investment inflows totaled €20.6 billion during that period with the current account deficit at €0.5 billion. German June construction orders weakened 2.9% y/y while France’s June current account deficit narrowed to -€512 million. Additionally, preliminary French Q2 GDP was confirmed at +0.8% q/q and +3.0% y/y. U.S. Treasury’s Taylor today said any global economic pullback “is a sign of healthy sustainability, not reversal” because the world has “several growth engines.” He acknowledged the U.S. would “like to see Europe growing more strongly” and cited ongoing weakness in Germany. Euro offers are cited around the $1.2390 level and some of this selling interest is linked to Eurosystem national banks while other selling interest is linked to defense of a $1.2400 option barrier. Stops are also cited above the $1.2400 figure with more selling pressure expected around the $1.2460 level.
The yen weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥109.75 level, still below its intraweek highs. Traders pushed the pair back above the ¥109.50 level when light crude for September delivery reached US$49.29 per barrel on the NYMEX, a fresh intraday record high and above yesterday’s record highest NYMEX settlement of $48.70. The front-month September futures contract expires today and many traders believe US$ 50.00 is a foregone conclusion. Notably, inflation-adjusted oil is around $8.00 cheaper per barrel than it was in the run-up to the first Gulf War. The relative highly correlation between the yen and crude given Japan’s significant dependence on imported oil continues to render the current spike a problem for the currency. Dealers cited “20th of the month bids” from Japanese corporates and the pair temporarily traded below the ¥109.00 figure where options triggers are cited. Data released in Japan overnight saw the June tertiary sector index rise 0.8% m/m while the June all-industry activity index climbed +0.6% m/m. The Nikkei 225 stock index lost 0.13% to close at ¥10,889.14. Dollar stops are cited below the ¥108.90 level with dollar bids around the ¥108.70/ 40 levels. Dollar offers are cited around the ¥110.20/ 30 levels and options traders cited option barriers around the ¥108.80/50 levels. The euro slumped vis-à-vis the yen today as the single currency tested bids around the ¥134.40 level after failing to get through the ¥135.65 level. Stops were reached below the ¥134.70 level and euro offers are seen around the ¥135.65 level.
The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.8185 level after failing to get above the $1.8340 level, around yesterday’s high. Stops were triggered below the $1.8290 level during sterling’s sell-off and bids around the $1.8270/ 50 levels were easily absorbed. Data released in the U.K. today saw John Lewis store sales climb +7.4% y/y in the week to 14 August. Data released in the U.K. yesterday saw public finances move back into surplus last month while BBA mortgage lending eased in July with growth coming in at £5.732 billion. Also, Rightmove reported that house prices have fallen 2.0% m/m in August but were higher 15.7% y/y. Cable offers are cited around the $1.8300/50/60 levels. The euro moved higher vis-à-vis the British pound today as the single currency tested offers around the £0.6765 level after yesterday’s sell-off. The £0.6745 level continues to be decent support for the cross.
The Swiss franc moved to intraweek lows vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2540 level and was supported around the CHF 1.2405 level. Swiss National Bank added two-week liquidity at 0.26% today compared with yesterday’s 0.25% one-week repo operation. Decent stops were triggered above the CHF 1.2480 level during the pair’s move higher in early North American dealing. Dollar bids are cited around the CHF 1.2400 figure. The euro extended its recent gains vis-à-vis the Swiss franc today as the single currency tested offers around the CHF 1.5405 level and was supported around the CHF 1.5345 level.
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