Wednesday April 25, 2007 - 15:05:56 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (25 April 2007)
The euro appreciated marginally vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3660 level and was supported around the US$ 1.3620 level. Notably, the common currency came within a few pips of its lifetime high, established in December 2004, and many traders believe a new lifetime high will be established later in the North American session or later this week. Traders sold the U.S. dollar in yesterday's North American session and may have another opportunity to do so today depending on the outcome of the Federal Reserve‚Äôs Beige Book that will be released today. The common currency shied away from intraday highs after the release of U.S. March new orders for durable goods data that saw the headline figure rise 3.4%, up from February's revised 2.4% level. Last month's rise represents the fastest monthly increase since December 2006 and was significantly higher than most estimates. Excluding transportation goods, durable goods orders increased 1.5% and excluding defense goods, durable goods orders rose 4.5%. Additionally, non-defense capital goods orders gained 11.7% last month and non-defense capital goods orders ex-aircraft orders improved 4.7%, the largest monthly gain since September 2004. These data were a surprise to most economists but many traders believe the U.S. dollar will remain on the defensive. Other data released in the U.S. today saw March building permits upwardly revised to 2.0% from the original 0.8% print. Moreover, March new home sales were up 2.6% from -4.2% in February. In eurozone news, the April headline Ifo business climate index improved to 108.6 from 107.7, above most estimates. These data add to the view that the European Central Bank will lift interest rates by 25bps to 4.00% in June. The German government raised its 2007 GDP growth forecast to 2.3% from 1.7% and it reported its jobless figure should fall below 3.5 million people next year. German economy minister Glos verbally intervened against the euro's recent strength overnight saying ‚Äúif it were to rise very strongly again, that would mean the risks for the local economy.‚ÄĚ The European Central Bank reported that the eurozone's current account surplus with the United States expanded to ‚ā¨58.5 billion last year from ‚ā¨46.8 billion in 2005. Overall, the eurozone's current account balance was -‚ā¨6.1 billion last year, worse than 2005‚Äôs -‚ā¨1.9 billion level. Euro bids are cited around the US$1.3565 level.
The yen depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•118.85 level and was supported around the ¬•118.25 level. For the fourth consecutive day, the pair was supported around the 50% retracement level of the move from ¬•114.45 to ¬•122.15. The pair's inability to move below this level over the last few trading sessions suggests that short yen carry trades are alive and well and many traders expect the dollar to test the ¬• 119.00 figure this week. Data released in Japan overnight saw the March trade surplus rise 73.9% y/y to ¬•1.633 trillion. The most important data to be released in Japan this week include Friday's consumer price inflation numbers. These data are important because the last round of consumer price inflation data evidenced a decline in consumer price pressures and some dealers believe the Japanese economy has not yet completely ended its long standing battle with deflation. Traders also await the release of Bank of Japan's semiannual outlook on prices and the economy. The Nikkei 225 stock index lost 1.24% to close at ¬•17,236.16. Dollar bids are cited around the ¬• 118.05/ 117.50 levels. The euro gained strength vis-√†-vis is the yen today as the single currency tested offers around the ¬•161.95 level and was supported around the ¬•161.25 level. The British pound appreciated vis-√†-vis the yen today as sterling tested offers around the ¬•237.95 level and was supported around the ¬•236.85 level. The Swiss franc lost marginal ground vis-√†-vis the yen today as the pair tested bids around the ¬•98.35 level and was capped around the ¬•98.70 level. In Chinese news, the Chinese yuan‚Äôs central parity rate was set at CNY 7.7203, down from CNY 7.7293, an indication that the pair could soon weaken back to the CNY 7.71 handle. Peoples Bank of China Deputy Governor Xiang spoke overnight and said China's planned foreign exchange reserves investment agency should issue new bonds and utilize the proceeds to purchase foreign exchange reserves from the central bank. Most traders expect that China's foreign exchange reserves will have reached US$ 1.2 trillion as of the end of last month.
The British pound appreciated vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0060 level and was supported around the US$ 2.0000 figure. Technically, today's intraday low was right around the 23.6% retracement level of the move from $1.9590 to $2.0130. Many traders believe the pair will soon test the $2.01 handle and possibly establish fresh multi-year highs. Data released in the U.K. today saw preliminary first quarter GDP growth of 0.7% q/q. and 2.8% y/y. These data were consistent with expectations and the services sector was responsible for most of the growth, up 0.5% m/m in February. Following these data, short sterling interest rate futures traded lower, an expectation that Bank of England will raise its headline repo rate as high as 6.00% this year. Many traders believe the BoE‚Äôs Monetary Policy Committee will tighten monetary policy by +25bps next month. Cable bids are cited around the $1.9995/ 25 levels. The euro was little changed vis-√†-vis the British pound today as the single currency tested bids around the ‚ā§0.6800 figure and was capped around the ‚ā§0.6815 level.
The Swiss franc appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1995 level and was capped around the CHF 1.2055 level. Today's intraday low represents the pair's weakest showing since 13 December 2006 and many traders are eyeing the CHF 1.1875 level as the pair‚Äôs next downside target. Dollar offers are cited around the CHF 1.2085 level. The euro and British pound appreciated vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6425 and CHF 2.4135 levels, respectively.
The Australian dollar appreciated vis-√†-vis is the U.S. dollar today as the Aussie tested offers around the US$ 0.8350 level and was supported around the US$ 0.8270 level. Technically, today's intraday low was right around the 50% retracement level of the move from US$ 0.8150 to US$ 0.8390 level and stops were hit above the US$ 0.8335 level. Expectations that Reserve Bank of Australia will tighten monetary policy next month have diminished on account of the benign consumer and producer price inflation data that were released this week. Still, the Australian dollar enjoys favourable interest rate differentials against most currencies and remains a favorite short carry trades involving they yen and Swiss franc. Australian dollar bids are cited around the US$ 0.8270 /40 levels.
The Canadian dollar extended recent gains vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1155 level and was capped around the C$ 1.1230 level. Technically, today's intraday high was right around the 76.4% retracement level of the move from C$ 1.1030 to C$ 1.1875. Traders are still talking about yesterday's Bank of Canada interest rate statement in which the central bank intimated it may raise interest rates further in the future but was not as hawkish as many traders had expected. The economic deceleration of the U.S. economy is probably the largest single detriment to higher interest rates in Canada at this time. Bank of Canada will release a monetary policy report tomorrow. U.S. dollar offers are cited around the C$ 1.1355 level.
Gold appreciated vis-√†-vis U.S. dollar today as the yellow metal tested offers around the US$ 686.30 level and was supported around the US$ 681.55 level. The pair's gains followed the U.S. dollar's intraday losses along with crude oil‚Äôs intraday gains. Traders continue to test key resistance levels ahead of the psychologically-important US$ 700.00 figure. Silver appreciated vis-√†-vis the U.S. dollar today as the pair tested offers around the US$ 13.89 level and was supported around the US$ 13.74 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude futures for June delivery tested offers around the US$ 65.15 level and was supported around the US$ 64.56 level. The pair could sustain a brief intraday rise above the US$66.00 figure yesterday. EIA inventories data released today in the U.S. saw crude inventories rise 2.1 million barrels in the latest week while gasoline inventories were off 2.8 million barrels. Traders continue to monitor developments in Nigeria where violence before and after last weekend's presidential election continues to impact that countries oil production capacity. Traders are also monitoring a meeting tomorrow between Iran and the European Union to discuss the former‚Äôs uranium enrichment activities.
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