Tuesday June 5, 2007 - 16:03:35 GMT
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Forex and Commodity Market Commentary and Analysis (5 June 2007)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3550 level and was supported around the $1.3485 level. The common currency reached its highest level since 16 May and stops were reached above the $1.3535 level, representing the 50% retracement of the move from $1.3680 to $1.3390. Federal Reserve Chairman Bernanke today indicated inflation expectations are ‚Äúwell-anchored,‚ÄĚ the U.S. economy will likely expand at or below trend-growth levels over the coming quarters, and the U.S. housing sector is likely to ‚Äúremain a drag on economic growth.‚ÄĚ Bernanke indicated there has been a ‚Äúgradual ebbing‚ÄĚ in core inflation. Data released in the U.S. today saw the May ISM non-manufacturing index print at 59.7, up from 56.0 in April. Traders are paying close attention to the Group of Eight summit in Germany with some anticipating a communiqu√© that refers to exchange rates while others believe China‚Äôs exchange rate regime will not receive a lot of attention. In eurozone news, the EMU-12 non-manufacturing PMI survey improved to 57.3 in May from 57.0 in April, above expectations, while the prices charged component fell to 53.1 from 54.4. The decline in the pricing component will likely not alter the European Central Bank‚Äôs expected +25bps monetary tightening tomorrow. Other data in the eurozone today saw EMU-13 April retail sales gain 0.2% from a revised 0.4% in March and 1.6% y/y. Remarks from ECB President Trichet will be closely scrutinized tomorrow. Euro bids are cited around the US$ 1.3465 level.
The yen appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•121.10 level and was capped around the ¬•121.90 level. Technically, today‚Äôs intraday high was right around the 61.8% retracement of the move from ¬•122.15 to ¬•121.55 and today‚Äôs intraday low was right around the 38.2% retracement of the move from ¬•119.45 to ¬•122.15. The pair came off after comments from Fed Chairman Bernanke‚Äôs speech were released in which he indicated the U.S. economy may grow below trend-growth levels over the next several quarters. This led to some unwinding of short yen carry trades. Traders await any comments from Bank of Japan Policy Board officials regarding the central bank‚Äôs monetary policy. The Nikkei 225 stock index gained 0.45% to close at ¬•18,053.81. Dollar bids are cited around the ¬•120.80 level. The euro was little-changed vis-√†-vis the yen as the single currency tested offers around the ¬•164.60 level and was supported around the ¬•163.90 level. The British pound weakened vis-√†-vis the yen as sterling tested bids around the ¬•241.50 level while the Swiss franc moved higher vis-√†-vis the yen and tested offers around the ¬•99.80 level. In Chinese news, the Chinese yuan‚Äôs central parity rate was set at a record CNY 7.6427 vis-√†-vis the U.S. dollar, down from CNY 7.6522.
The British pound charged higher vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 1.9965 level and was supported around the $1.9905 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from $1.9545 to $2.0130. Sterling gained intraday ground after Bank of Syria announced it is shifting its currency peg from the U.S. dollar to a basket of currencies ‚Äď including sterling. Data released in the U.K. today saw the May services PMI survey print at 57.2 while the prices charged component fell to 52.5, its weakest showing since February 2006. Most traders believe Bank of England‚Äôs Monetary Policy Committee will keep interest rates unchanged on Thursday. Cable bids are cited around the US$ 1.9860/ 40 levels. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6790 level and was supported around the ‚ā§0.6770 level.
The Swiss franc appreciated sharply vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2160 level and was capped around the CHF 1.2240 level. Technically, today‚Äôs intraday low was right around the 50% retracement of the move from CHF 1.1995 to CHF 1.2330. Traders await May unemployment data on Thursday. Dollar offers are cited around the CHF 1.2270 level. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6475 and CHF 2.4275 levels, respectively.
The Australian dollar appreciated vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8405 level and was supported around the $0.8335 level. Today‚Äôs intraday high represents the pair‚Äôs strongest showing since February 1989. Data released in Australia today saw the Q1 current account deficit improve to ‚ÄďA$ 15.381 billion from ‚ÄďA$ 15.502 billion in Q4. Also, April building approvals were up 8.1% m/m and 4.5% y/y and the Westpac June index of industrial activity printed at 56.1 from 54.2 in March. Traders await Reserve Bank of Australia‚Äôs interest rate decision tonight followed by Q1 GDP numbers. Australian dollar bids are cited around the US$ 0.8315 level.
The Canadian dollar came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0610 level and was supported around the C$ 1.0560 level. Traders await the release of April building permits and the May PMI survey tomorrow. U.S. dollar offers are cited around the C$ 1.0695 level.
Gold moved higher vis-√†-vis the U.S. dollar today as the yellow metal tested offers around the US$ 673.35 level and was supported around the $669.40 level. The U.S. dollar‚Äôs intraday sell-off contributed to gold‚Äôs bid tone today, as did strong inflation data in the eurozone. Silver moved lower vis-√†-vis the U.S. dollar as the pair tested bids around the US$ 13.84 level and was supported around the $13.69 level.
Crude oil eased vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for July delivery tested bids around the US$ 65.41 level and were capped around the $66.19 level. Traders bid the pair higher yesterday on news of a cyclone near the Middle East but they have since discounted this news. The storm will likely make landfall in Oman. Traders await tomorrow‚Äôs weekly EIA energy inventories data.
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