Tuesday May 1, 2007 - 15:30:02 GMT
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Forex and Commodity Market Commentary and Analysis (1 May 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3615 level and was capped around the $1.3670 level. Technically, today‚Äôs intraday low was just above the 50% retracement of the move from $1.3540 to $1.3680. Data released in the U.S. today the April ISM manufacturing index improve to 54.7 from 50.9 in March, stronger-than-expected. The employment, new orders, and prices paid sub-indices all moved higher. These data were tempered by pending home sales data that saw nearly a 5% monthly decline and a 10.5% y/y pullback. These are the latest housing data that confirm the depressed state of the U.S. residential housing market. Traders will pay very close attention to comments from Federal Reserve Chairman Bernanke later in the North American session. Liquidity was reduced in European dealing today on account of the May Day holiday. The German government confirmed that German unemployment fell below the 4 million level last month, printing at 3.967 million. Euro bids are cited around the US$ 1.3580 level.
The yen weakened marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•119.05 level and was capped around the ¬•119.65 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from ¬•109.00 to ¬•122.15. Data released in Japan overnight saw large employee average pay decline 0.4% while overtime pay was also down or 0.4%. Liquidity remains reduced in Japan and Asia this week on account of the Golden week holidays. Japanese finance minister Omi spoke today and reiterated that exchange rates should reflect economic fundamentals. Traders remain alert for indications that short yen carry trades may be diminishing. The Nikkei 225 stock index lost 0.72% to close at ¬•17,274.98. Dollar bids are cited around the ¬•118.75/ 30 levels. The euro depreciated marginally vis-√†-vis the yen as the single currency tested bids around the ¬•162.80 level and was capped around the ¬•163.30 level, a fresh lifetime high. The British pound moved higher vis-√†-vis the yen as sterling tested offers around the ¬•239.75 level while the Swiss franc came off vis-√†-vis the yen as the pair tested bids around the ¬•98.75 levels.
The British pound weakened marginally vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9980 level and was capped around the $2.0070 level. Technically, today‚Äôs intraday high was right around the 76.4% retracement of the move from $2.0130 to $1.9865. Many data were released in the UK today. First, Land Registry reported that March house prices rose 1.0% to an annual 8.3% gain, an indication that house prices remain firm and elevated. Second, CBI noted that the balance of retailers reporting annualized growth in sales volumes was +44%, the fifth consecutive monthly positive balance and the highest since May 2004. Many traders believe these data will pressure Bank of England's Monetary Policy Committee to tighten monetary policy this month. Also, the April manufacturing PMI survey printed at 53.9, down from 54.2 while the output index increased to its highest level since September 2006 and prices sub-indices were firm. Cable bids are cited around the US$ 1.9925 level. The euro weakened vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6805 level and was capped around the ‚ā§0.6825 level.
The Swiss franc depreciated vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2135 level and was supported around the CHF 1.2050 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from CHF 1.2280 to CHF 1.1995. Swiss finance minister Merz spoke about short Swiss franc and short yen carry trades today and said ‚ÄúWe, and the Swiss National Bank, are aware of the risks but it is not certain that these risks will materialize. Should this change we would have to scrutinize this development more closely.‚ÄĚ Dollar offers are cited around the CHF 1.2170 level. The euro and British pound appreciated vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6515 and CHF 2.4270 levels, respectively.
The Australian dollar came off vis-√†-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.8275 level and was capped around the $0.8325 level. Technically, today‚Äôs intraday high and low were right around the 23.6% and 50.0% retracement levels of the move from US$ 0.8150 to $0.8390, respectively. Data released in Australia today saw the April AIG manufacturing performance index fall 0.7 index points to 51.7. Traders await Reserve Bank of Australia's interest rate decision later today and most traders do not expect any change in interest rates from the central bank this month. Australian dollar bids are cited around the US$ 0.8240/ 05 levels.
The Canadian dollar appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1050 level and was capped around the C$ 1.1110 level. The pair has not been this weak since September 2006. Data released in Canada today saw the industrial product price index rise 1.3% m/m, the fifth consecutive monthly increase. Also, the raw materials price index rose 1.3% in March, down from 2.5% in February. U.S. dollar offers are cited around the C$ 1.1150 level.
Gold fell sharply vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 672.10 level and was capped around the $678.95 level. Liquidity conditions were reduced in Asia and Europe today on account of the Golden Week and May Day holidays. Silver came off vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 13.14 level and was capped around the $13.47 level.
Crude oil gained ground vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for June delivery tested offers around the US$ 66.12 level and was supported around the $65.04 level. The market continues to digest news of Saudi Arabia‚Äôs arrest of 172 militants on Friday who were planning a major attack on that country‚Äôs oil production infrastructure. Traders also await word as to whether Al-Qaeda‚Äôs top leader in Iraq was killed today as has been reported. Tomorrow's weekly U.S. oil and gasoline inventories data will be closely scrutinized by the markets. Traders are also monitoring events in Nigeria where oil production is down nearly 25%. Notably, a Chevron ship in Nigeria was attacked by militants who also kidnapped foreign workers.
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