Thursday April 26, 2007 - 14:38:10 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (26 April 2007)
The euro came off vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3585 level and was capped around the $1.3655 level. Technically, today's intraday low was right around the 23.6% retracement level of the move from $1.3340 to $1.3665. The pair came within a couple pips yesterday of establishing a fresh lifetime high that dates back to December 2004. Data released in the U.S. today caused the pair to move lower as weekly initial jobless claims fell by 20,000 to 321,000 in the week ending 21 April, below expectations, while continuing jobless claims gained 65,000 to 2.60 million. Traders bought dollars on these data ahead of next week's crucial April non-farm payrolls report. Dealers will closely monitor speeches by Dallas Federal Reserve President Fisher and Federal Reserve Governor Mishkin later in the North American session. The Fed's Beige Book was released yesterday and it reported sluggishness in manufacturing activity and residential real estate activity. The Fed noted that most regions of the U.S. reported "only modest or moderate expansions." The Federal Open Market Committee will next convene on 9 May when it is expected to hold the federal funds target rate steady at 5.25%, the rate it has been at since June 2006. In eurozone news, the German May GfK consumer climate index improved to 5.5 from 4.4 in April. Also, German March wholesale sales were up 2.0% m/m and 2.0% y/y and French business sentiment rose to its highest level in six years in April. European Central Bank member Mersch was quoted as saying interest rates remain in a "period of normalization‚Ä¶and are still on the accommodative side.‚ÄĚ Most traders expect the ECB to lift interest rates by 25bps in June, taking the main refinancing rate to 4.00%. Euro bids are cited around the $1.3540 level.
The yen lost ground vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•119.45 level and was supported around the ¬•118.50 level. Technically, today's intraday low was just above the 38.2% retracement level of the move from ¬•119.85 to ¬•117.60 and stops were hit above the ¬•119.30 level, representing the 76.4% retracement level of this range. Traders await Bank of Japan Policy Board‚Äôs interest rate decision overnight along with the central bank‚Äôs semiannual economic and monetary policy outlook. Additionally, many other data including March consumer price inflation data will be released tonight and any indication that Japan continues to experience deflationary pressures in its economy could weaken the yen further. The Nikkei 225 index gained 1.12% to close at ¬•17,429.17. Dollar bids are cited around the ¬•118.75 level. The euro reached an all-time high vis-√†-vis the yen as the single currency tested offers around the ¬•162.55 level and was supported around the ¬•161.65 level. The British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses tested offers around the ¬•238.70 level and ¬•98.90 level, respectively. The Chinese yuan depreciated vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.7263 in the over-the-counter market, up from CNY 7.7161.
The British pound fell appreciably vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9900 figure and was capped around the $2.0060 level. Technically, today's intraday high was right around the 61.8% retracement level of the move from $2.0130 to $1.9955. Also, today's intraday low was around the 23.6% retracement level of the move from $1.9185 to $2.0130. Traders booked profits after the release of the U.S. weekly initial job claims data. A market rumour circulated that HSBC Bank was buying as much as ‚ā§5.0 billion to meet dividend requirements. Data released in the U.K. today saw Nationwide April house prices climb 0.9% m/m and 10.2% y/y, the latest evidence that Bank of England‚Äôs interest rate hikes may not be slowing the U.K. economy as much as some policymakers would like. A government survey released today saw U.K. inflation expectations stable at 2.5% in April for 2007, down from January's 2.7% level. Some dealers believe that sterling may have a difficult time reaching new recent highs because the market has largely discounted a 25bps rate hike next month to 5.50%. Cable bids are cited around the $1.9860 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6830 level and was supported around the ‚ā§0.6800 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2095 level and was supported around the CHF 1.2030 level. Technically, today's intraday high was just above the 23.6% retracement level of the move from CHF 1.2770 to CHF 1.1875. Traders await the release of the Swiss April KOF leading indicator tomorrow. Dollar offers are cited around the CHF 1.2140 level. The euro gained marginal ground vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6445 level and the British pound weakened vis-√†-vis the Swiss franc as sterling tested bids around the CHF 2.4040 level.
The Australian dollar came off vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8265 level and was capped around the $ 0.8355 level. Technically, today's intraday low was right around the 50% retracement level of the move from $0.8150 to $0.8390. Data released in Australia overnight saw the February Westpac leading index climb 5.7% y/y, up from January's 4.9% rise. Notably, Reserve Bank of New Zealand raised its official cash rate by 25 bps to 7.75% overnight, the second consecutive month the central bank has tightened monetary policy. Traders are split as to whether Reserve Bank of Australia will raise interest rates next month, especially following this week's benign producer and consumer price inflation data. Australian dollar bids are cited around the US$ 0.8210 level.
The Canadian dollar weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1215 level and was supported around the C$ 1.1140 level. Technically, today's intraday high was just below the 76.4% retracement level of the move from C$ 1.1030 to C$ 1.1875. Bank of Canada Governor Dodge reported that he will not serve a second term. Traders await the release of Bank of Canada's monetary policy report today. U.S. dollar offers are cited around the C$ 1.1230 level.
Gold fell sharply vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 672.95 level and was capped around the $686.70 level. The U.S. dollar‚Äôs strong intraday rally led to gold‚Äôs intraday weakness today. Silver slumped vis-√†-vis the U.S. dollar today as the greenback tested bids around the US$ 13.50 level and was capped around the $13.85 level.
Crude oil moved lower vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude futures for June delivery tested bids around the US$ 65.09 level and was capped around the $65.98 level. Traders sold the pair on rumours that some progress is being made in meetings today between the European Union and Iran regarding the latter's uranium enrichment activities. The price is being supported by speculation that U.S. gasoline stocks will remain at relatively low levels at the beginning of the U.S. summer driving period in about one month.
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