Monday August 30, 2004 - 14:38:52 GMT
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GCI Financial - www.gcitrading.com
Forex Market Commentary and Analysis (30 August 2004)
The euro gained modest ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2060 level and was supported around the $1.1985 level. The pair is trading around a major technical support level as the $1.2000 figure is around the 38.2% retracement level of the move from $1.0502 (March 2003) to $1.2929 (February 2004). Traders eagerly await Friday’s August U.S. non-farm payrolls data to gauge the health of employment in the U.S. and try to determine the Fed’s next interest rate move on 21 September. Fed Chairman Greenspan’s Jackson Hole speech on Friday included warnings that the U.S. needs to lower its federal budget deficits and increase its national savings rate. Greenspan cited an interesting statistic and suggested the U.S. cannot continue to depend on borrowing foreign savings equal to about 5% of U.S. GDP. Data released in the U.S. today saw July personal income up a mere 0.1% while personal consumption expenditures were up 0.8% compared with -0.4% in June. These PCE data are important because they suggest final private demand will have a strong impact on Q3 GDP data. The PCE deflator and core PCE deflator were flat, an indication that inflation remains subdued. Data released in the eurozone today saw German July wholesale sales +0.3% m/m and -4.3% y/y while Italian retail sales rose 2.0% y/y in June after May’s -3.2% setback. Also, Italian July producer prices rose +0.3% m/m and +3.3% y/y. Dollar offers are seen around the $1.2080 level while dollar bids are seen around the $1.1975/55 levels.
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers just below the ¥110.50 level during early European dealing. Japanese names were on the bid of the yen crosses during Australasian dealing and pushed the dollar to intraday highs after stops were hit above the ¥110.10 level. Swiss names were also seen buying the pair through the ¥110.25 level. Finance minister Tanigaki today saw the government will continue to fight deflation with Bank of Japan and added the economic recovery is “firm” and said it is spreading to the household sector. Data released in Japan today saw July retail sales up +0.7% m/m and +0.8% y/y while large-store same-store sales were off 1.5% y/y. Notably, OPEC President Purnomo Yusgiantoro said OPEC has plans to increase oil production capacity. The yen did not benefit greatly from these comments on account of renewed attacks against oil production facilities in southern Iraq and a marginal increase in the price of NYMEX crude futures to an intraday high of $43.50 per barrel. The Nikkei 225 stock index fell 0.22% to close at ¥11,184.53. Dollar offers are seen around the ¥110.50/70 levels along with more resistance around the ¥111.00 figure. Dollar bids are seen around the ¥110.00/¥109.70 levels. The euro gained ground vis-à-vis the yen today as the single currency tested offers around the ¥132.75 level and was supported around the ¥131.60 level during Australasian dealing. Euro bids are seen around the ¥132.00/ ¥131.60 levels with offers around the ¥132.70/85 levels. Additional offers are seen around the ¥133.20 level.
The British pound gained marginal ground vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.7955 level and was supported around the $1.7855 level during Australasian dealing. Liquidity was significantly reduced during European dealing on account of the U.K. Bank holiday. Technically, some dealers believe the fall below the $1.7880 level is significant and presages more sterling weakness. Cable bids are seen around the $1.7850 level and cable offers are seen around the $1.7920/50 levels. The euro retraced most of its intraday losses vis-à-vis the British pound today as the single currency tested offers around the £0.6735 level and was supported around the £0.6700 figure. The move above the £0.6720 level was technically significant and option traders cite an expiry at the £0.6750 level during 1400 GMT. Euro stops are seen around the £0.6700 figure.
The Swiss franc strengthened vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2775 level and failed to get above the CHF 1.2855 level during early European dealing. Swiss National Bank added one-week liquidity at 0.24% today compared with Friday’s two-week offering at 0.25%. Some traders believe the SNB is trying to move the three-month LIBOR rate back towards the 0.5% level. The euro came off marginally vis-à-vis the Swiss franc today as the single currency tested bids around the CHF 1.5390 level and was capped around the CHF 1.5420 level.
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