Monday April 23, 2007 - 14:55:54 GMT
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Forex and Commodity Market Commentary and Analysis (23 April 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3540 level and was capped around the $1.3605 level. Technically, today‚Äôs intraday low was just below the 23.6% retracement of the move from $1.3255 to $1.3635. The dollar gained ground after U.S. Treasury Secretary Paulson was quote as saying he is a ‚Äúbig believer in a strong dollar‚ÄĚ late Friday. Also, a media report quoted European Central Bank member Garganas as saying ‚Äúto the extent that the strength of the euro helps contain inflationary pressure, there is less reason to raise interest rates,‚ÄĚ a comment that Garganas subsequently denied. The common currency took little notice of the French presidential election over the weekend in which Sarkozy and Royal will go into a run-off election on 6 May. Also, Ecofin finance ministers met over the weekend to discuss the euro and the eurozone economy and were generally sanguine about the common currency‚Äôs level. Traders await tomorrow‚Äôs German Ifo survey on business confidence. Data released in the eurozone today confirmed that the bloc‚Äôs 2006 budget deficit amounted to 1.6% of GDP, down from 2.5% in 2005. In U.S. news, traders await March existing home sales today tomorrow along with April consumer confidence results. Euro bids are cited around the US$ 1.3490/ 1.3445 levels.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•119.00 figure and was supported around the ¬•118.20 level. Technically, today‚Äôs intraday high was just below the 23.6% retracement of the move from ¬•109.00 to ¬•122.15. The yen reversed course overnight after traders pushed the yen higher following an upgrade by Standard & Poors to Japan‚Äôs long-term sovereign ratings. Data released in Japan overnight saw March supermarket sales fall 1.5% y/y, the fifteenth consecutive monthly decline. Carry trades appear to be alive and well as there is little indication that Bank of Japan will be lifting interest rates anytime soon. A news report surfaced that Japan may form a new agency to manage its massive US$ 900 billion+ war chest of foreign reserves. The Nikkei 225 stock index gained 0.02% to close at ¬•17,455.37. Dollar bids are cited around the ¬•118.05/ 117.40 levels. The euro came off marginally vis-√†-vis the yen as the single currency tested bids around the ¬•160.45 level and was capped around the ¬•161.80 level. The British pound moved higher vis-√†-vis the yen as sterling tested offers around the ¬•238.30 level while the Swiss franc moved lower vis-√†-vis the yen and tested bids around the ¬•97.80 level. The Chinese yuan weakened vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7247 in the over-the-counter market, up from CNY 7.7179. People‚Äôs Bank of China advisor Fan Gang reiterated the yuan‚Äôs exchange rate will not resolve China‚Äôs external imbalances.
The British pound lost ground vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9970 level and was capped around the $2.0060 level. Robust mortgage lending data were released in the U.K. today. CML and BSA reported gross mortgage lending reached a record performance in March while Halifax reported U.K. house prices appreciated 2.8% in Q1 2007. The M4 money supply was up 12.8% y/y in March while M4 lending expanded ‚ā§12.7 billion. The Ernst & Young ITEM Club report was released overnight and indicated the U.K. is ‚Äúskating on thin ice‚ÄĚ with exceptionally high debt levels. Cable bids are cited around the US$ 1.9925 level. The euro came off marginally vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6775 level and was capped around the ‚ā§0.6795 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2125 level and was supported around the CHF 1.2055 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from CHF 1.2435 to CHF 1.2025. Traders await tomorrow‚Äôs UBS March consumption indicator. Dollar offers are cited around the CHF 1.2155/ 1.2215 levels. The euro and British pound appreciated vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6430 and CHF 2.4240 levels, respectively.
The Australian dollar depreciated vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8320 level and was capped around the $0.8375 level. Stops were hit below the $0.8335 level, representing the 23.6% retracement of the move from $0.8150 to $0.8390. Data released in Australian today saw the final producer price index for commodities remain unchanged in the March quarter from the December quarter, below expectations of a +0.6% gain. Traders sold the Aussie on this news on reduced expectations that Reserve Bank of Australia will raise interest rates next month. Australian dollar bids are cited around the US$ 0.8300/ 0.8270 levels.
The Canadian dollar appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1215 level and was capped around the C$ 1.1240 level. Traders await Bank of Canada‚Äôs interest rate decision tomorrow. U.S. dollar bids are cited around the C$ 1.1150 level.
Gold weakened vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 686.48 level and was capped around the $693.35 level. The U.S. dollar‚Äôs intraday gains contributed to gold‚Äôs losses. Silver gained marginal ground vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 13.98 level and was supported around the $13.82 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for June delivery tested offers around the US$ 64.61 level and was supported around the $63.75 level. The European Union agreed to implement sanctions against Iran and this led to gains in energy prices, as did lingering concerns that violence could return to Nigeria following that country‚Äôs presidential elections this weekend.
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