Friday May 25, 2007 - 15:34:16 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (25 May 2007)
The euro gained ground vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3470 level and was supported around the $1.3410 level. Technically, today‚Äôs intraday high and low were right around the 50% and 61.8% retracement levels of the move from $1.3255 to $1.3680, respectively. Data released in the U.S. today saw April existing home sales fall 2.6% to an annualized 5.99 million units, below expectations. These data follow yesterday‚Äôs data that confirmed new home sales were up 16.2% in April. In eurozone news, the German GfK consumer climate index for June rose to 7.3 from a revised 5.7 in May, above expectations. Also, German April import prices were up 0.9% m/m and 0.5% y/y and French consumer spending was off 0.3% m/m and up 2.5% y/y. Traders have recently been pricing in less of a probability that the Federal Reserve will lower interest rates this year. Euro bids are cited around the US$ 1.3355 level.
The yen came off marginally vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•121.75 level and was supported around the ¬•120.85 level. Technically, today‚Äôs intraday low was just below the 38.2% retracement of the move from ¬•119.45 to ¬•121.85. Data released in Japan overnight saw core consumer prices fall 0.1% in April, the third consecutive monthly decline. These data suggest deflationary pressures remain evident in the Japanese economy and may delay Bank of Japan‚Äôs next interest rate hike, widely believed to come some time after the July parliamentary elections in Japan. Traders also sold yen after reports that North Korea test-fired some short-range missiles into the Sea of Japan. The Nikkei 225 stock index lost 1.22% to close at ¬•17,481.21. Dollar bids are cited around the ¬•120.35 level. The euro moved higher vis-√†-vis the yen as the single currency tested offers around the ¬•163.75 level and was supported around the ¬•162.15 level. The British pound and Swiss franc appreciated vis-√†-vis the yen as the crosses tested offers around the ¬•241.65 and ¬•99.10 levels, respectively. The Chinese yuan came off marginally vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.6527 in the over-the-counter market, up from CNY 7.6519. Chinese Vice Premier Wu Yi today said China will expand the yuan‚Äôs trading band in the future.
The British pound gained marginal ground vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9875 level and was supported around the $1.9830 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from $1.9545 to $2.0130. Bank of England Monetary Policy Committee Member Sentance today said ‚ÄúWe're keen to keep inflation under control, to keep inflation at the 2 pct level which the government has set and to keep the economy on a steady course. We do understand concerns about not overdoing it and we will certainly keep that in mind in our decisions.‚ÄĚ Most traders believe another +25bps rate hike is in the cards for the MPC, possibly as early as next month. The GDP deflator was up 3.2% y/y in Q1, its strongest quarterly rate since Q4 2003. Data released in the U.K. today confirmed the U.K. economy expanded 0.7% in Q1 while annualized growth was upwardly revised to 2.9% y/y from 2.8% y/y. Economic growth has now exceeded its trend rate of growth for five consecutive quarters. Cable bids are cited around the US$ 1.9770 level. The euro gained ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6780 level and was capped around the ‚ā§0.6755 level.
The Swiss franc appreciated marginally vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2255 level and was capped around the CHF 1.2290 level. Data released in Switzerland today saw the May KOF economic barometer climb 1.96 from 1.90 in April and 1.84 in March. These data suggest the Swiss economy will accelerate in the second half of the year. Dollar offers are cited around the CHF 1.2325 level. The euro moved higher vis-√†-vis the Swiss franc as the single currency tested offers around the CHF 1.6520 level while the British pound weakened vis-√†-vis the Swiss franc and tested bids around the CHF 2.4335 level.
The Australian dollar moved higher vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8215 level and was supported around the $0.8175 level. Australian dollar bids are cited around the US$ 0.8160 level.
The Canadian dollar extended recent gains vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0775 level and was capped around the 1.0870 level. The pair has not been this weak since December 1977. Most traders believe Bank of Canada will tighten monetary policy in the next few months. U.S. dollar offers are cited around the C$ 1.0870 level.
Gold climbed higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 656.05 level and was supported around the $649.10 level. The U.S. dollar‚Äôs intraday losses contributed to gold‚Äôs gains. Silver gained marginal ground vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 12.97 level and was supported around the $12.82 level.
Crude oil was little-changed vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for July delivery tested offers around the US$ 65.12 level and were supported around the $64.34 level. Six additional foreign oil workers were kidnapped in Nigeria by militants. Traders are also keeping the price of oil bid following President Bush‚Äôs statement yesterday that the U.S. will work with the United Nations Security Council to impose additional sanctions against Iran. Furthermore, additional U.S. refineries are announcing suspensions in business activities and many traders believe this will lead to even further declines in U.S. gasoline stocks ahead of the U.S. summer driving season.
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