Tuesday August 24, 2004 - 16:00:56 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (24 August 2004)
The euro was fairly volatile vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2170 level and later dropped to the $1.2095 level during North American dealing. Stops were hit below the $1.2130 level during Australasian dealing and dealers are citing talk of “strong Asian demand” around the $1.2000 figure, the same level being touted as a major option barrier. Data released in the U.S. today saw July existing home sales fall 2.9% to a 6.72 million annual pace, below forecasts. Mortgage lenders, however, predict borrowing rates will continue to support the housing market. Data released in the eurozone today saw EMU-12 June industrial orders fall 6.5% m/m with the annual rate decelerated to +10.9% y/y from a revised +16.4% y/y in May. Also, German Q2 GDP was unrevised at +0.5% q/q and +2.0% y/y with some provisional August CPI data for some German states in-line or above expectations in separate data releases today. Also, final French July HICP was unrevised at -0.2% m/m and +2.6% y/y. Some of these inflation data are going to be worrisome to ECB officials who up until now have largely been cautious about the recent spike in oil prices. A policy response will probably be avoided if the effects are deemed transitory and not embedded in second-round price effects like wages. Interestingly, Fed Governor Bernanke was on the wires last night saying the Fed probably has some room to support the economy if the oil price spike does not filter through the economy. Dealers are curious as to whether this was Fedspeak for no change in interest rates on 21 September or not. Market participants await comments from Fed Chairman Greenspan on Friday at the Jackson Hole Fed symposium. Euro bids are cited around the $1.2075/50 levels.
The yen rallied vis-à-vis the U.S. dollar today as the greenback could not sustain its move above the ¥110.00 figure and fell to the ¥109.35 level during North American dealing. A pullback in October NYMEX futures to an intraday low around the $45.35 level saw some unwinding of short yen trades in the crosses. Stops were hit below bids around the ¥109.60 level and the pair struggled with the ¥110.05/10 level a couple of times. Options traders cite a major ¥110.00 expiry at 1400 GMT. FSA’s Takenaka talked about escalating oil prices today saying a sustained move “could be negative for the supply side of the domestic economy” while finance minister Tanigaki cautioned against the effects on the global economy. Data released in Japan overnight saw July department store sales fell 1.3% y/y, the fifth consecutive monthly decline. Demand for yen was also cited overnight on account of a successful ¥600 billion 20-year JGB auction. More Japanese data are expected this week including CPI and employment data on Friday. The Nikkei 225 stock index failed to sustain gains above the psychologically-important ¥11,000 figure today but gained 0.22% to close at ¥ 10,985.33. Dollar offers are seen around the ¥110.50/60/90 levels. The euro spun lower vis-à-vis the yen today as the single currency tested bids around the ¥ 132.65 level after failing to get above the ¥133.65 level today. Options traders cite a strike at ¥132.50 but it is not known when it rolls off. Euro offers are seen around the ¥133.60 level with stops above the ¥133.90 level.
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