Wednesday May 9, 2007 - 14:56:10 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (9 May 2007)
The euro gained marginal ground vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3565 level and was supported around the $1.3525 level. Stops were hit above the $1.3555 level, representing the 23.6% retracement of the move from $1.3680 to $1.3515. Traders await todayâ€™s interest rate decision from the Federal Open Market Committee with most traders expected the Fed to keep borrowing costs unchanged. As always, todayâ€™s monetary policy statement will be dissected to see how preoccupied the FOMC remains with elevated energy costs and inflation pressures. Traders will look to see how the Fedâ€™s statement will offer policymakers more flexibility to reduce interest rates if needed later in the year, particularly if the slowdown in the U.S. housing market worsens. Last weekâ€™s April non-farm payrolls data were weaker-than-expected and this may offer the Fed an opportunity to move policy closer to a perceived neutral level. Ahead of the Fed, three U.S. congressional sub-committees are holding hearings on currency manipulation. There could be some jawboning about the yuan and yen as a result of the meetings. In eurozone news, Germanyâ€™s March trade surplus expanded to â‚¬18.4 billion from â‚¬14.2 billion in February. European Central Bank is not expected to raise interest rates tomorrow and remarks from ECB President Trichet will be closely watched. The ECB is expected to lift borrowing costs by +25bps next month. Euro bids are cited around the US$ 1.3485 level.
The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥119.75 level and was capped around the Â¥120.10 level. Traders moved into yen on increasing speculation that next weekâ€™s GDP data for the January â€“ March period will be stronger-than-expected and accelerate Bank of Japanâ€™s next monetary tightening. Remarks from Bank of Japan Governor Fukui tomorrow will be closely scrutinized, particularly given Japanâ€™s recent move back towards deflation at the consumer price level. Data released in Japan today saw the March leading index improve to 40.0 from 27.3 in February while the coincident index came off to 22.2 from 30.0. The Nikkei 225 stock index climbed 0.52% to close at Â¥17,748.12. Dollar bids are cited around the Â¥119.20 level. The euro moved higher vis-Ã -vis the yen as the single currency tested bids around the Â¥162.05 level and was capped around the Â¥162.55 level. The British pound gained ground vis-Ã -vis the yen as sterling tested offers around the Â¥239.40 level while the Swiss franc weakened vis-Ã -vis the yen and tested bids around the Â¥98.25 level.
The British pound expanded sharply vis-Ã -vis the U.S. dollar today as cable tested offers around the US$ 1.9995 level and was supported around the $1.9880 level. Technically, todayâ€™s intraday high was right around the 23.6% retracement of the move from $1.9590 to $2.0130. Data released in the U.K. today saw BRCâ€™s measure of like-for-like retail sales rise 2.4% y/y in April. Also, REC reported U.K. April permanent wage inflation reached its highest level in nearly seven years and Nationwide reported its April consumer confidence index improved to +90 from +88 in March. Traders continue to expect Bank of Englandâ€™s Monetary Policy Committee will lift the repo rate by +25bps tomorrow but a minority believe a +50bps hike is in the cards. Cable bids are cited around the US$ 1.9925 level. The euro moved lower vis-Ã -vis the British pound as the single currency tested bids around the â‚¤0.6780 level and was capped around the â‚¤0.6810.
The Swiss franc appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2140 level and was capped around the CHF 1.2185 level. Technically, todayâ€™s intraday low was right around the 50% retracement of the move from CHF 1.2280 and CHF 1.1995. Traders await the release of the SECO consumer climate index tomorrow. Dollar offers are cited around the CHF 1.2215/ 65 levels. The euro weakened vis-Ã -vis the Swiss franc as the single currency tested bids around the CHF 1.6465 level and the British pound moved higher vis-Ã -vis the Swiss franc as sterling tested offers around the CHF 2.4305 level.
The Australian dollar gained ground vis-Ã -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8305 level and was supported around the $0.8265 level. Technically, todayâ€™s intraday high was right around the 23.6% retracement of the move from $0.8150 to $0.8390. Data released in Australia today saw the weighted average of established houses prices in Australian capital cities rise 1.1% q/q. Australian Treasurer Costello delivered his budget and is estimating a budget surplus of A$ 10.6 billion for 2007/ 2008. The government also lifted its economic growth forecast to 3.75% from 2.5%. Australian dollar bids are cited around the US$ 0.8240 level.
The Canadian dollar weakened marginally vis-Ã -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1090 level and was supported around the C$ 1.1040 level. Technically, todayâ€™s intraday high was right around the 38.2% retracement of the move from C$ 1.1225 to C$ 1.1005 level. Traders await the March new house price index and March merchandise trade data tomorrow. U.S. dollar offers are cited around the C$ 1.1150 level.
Gold came off vis-Ã -vis the U.S. dollar today as the yellow metal tested bids around the US$ 682.30 level and was capped around the $686.40 level. Traders await todayâ€™s FOMC policy statement. Silver moved lower vis-Ã -vis the U.S. dollar as the pair tested bids around the US$ 13.31 level and was capped around the $13.52 level.
Crude oil weakened vis-Ã -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for June delivery tested bids around the US$ 61.49 level and was capped around the $ 62.45 level. Data released in the U.S. today saw weekly gasoline inventories climb 400,000 barrels while distillate and crude oil stocks were up 1.7 million and 5.6 million barrels, respectively. Further actions by Nigerian militants today underpinned the price.
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