Monday June 25, 2007 - 16:14:44 GMT
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Forex and Commodity Market Commentary and Analysis (25 June 2007)
The euro weakened vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3440 level and was capped around the $1.3470 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from $1.3255 to $1.3680 and today‚Äôs intraday low was right around the 61.8% retracement of the move from $1.3550 to $1.3260. Data released in the U.S. today saw May existing home sales fall 0.3% to 5.99 million annualized units, the lowest rate since June, 2003. Notably, inventories of unsold homes reached their highest level since June, 1992. These data underscore the weak condition of the U.S. housing market, a key factor that could result in an interest rate cut by the Federal Reserve this year. Traders await the Federal Open Market Committee‚Äôs interest rate decision on Thursday along with the release of revisions to Q1 GDP data. Data released in the U.S. today saw the Chicago Fed National Activity Index for May print at -0.22, up from April‚Äôs reading of -0.30. In eurozone news, the German July Gfk consumer confidence index printed at 8.4, exceeding forecasts. The European Central Bank released a report that estimates the share of euro-denominated assets in global foreign exchange reserves was about 25.8% in December 2006 from 24.9% in December 2004. Germany‚Äôs Ifo institute lifted its 2007 GDP forecast to 2.6% from 1.9%. Euro bids are cited around the US$ 1.3375 level.
The yen appreciated vis-√†-vis the yen today as the greenback tested bids around the ¬•123.30 level and was capped around the ¬•123.95 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from ¬•120.75 to ¬•124.15. The pair lost ground following the release of a report from Bank for International Settlements that characterized the yen‚Äôs recent weakness as ‚Äúanomalous‚ÄĚ and warned the currency could rise sharply once market sentiment shifts. Also, the yen gained ground after former Japanese cabinet minister Takenaka reported Bank of Japan will likely raise interest rates by +50bps this year if the Liberal Democratic Party retains control of parliament in next month‚Äôs election. Most traders believe the BoJ could lift rates as early as August by +25bps. The Nikkei 225 stock index lost 0.56% to close at ¬•18,087.48. Dollar bids are cited around the ¬•122.85 level. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•165.90 level and was capped around the ¬•166.90 level. The British pound and Swiss franc depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•246.45 and ¬•100.40 levels, respectively. In Chinese news, People‚Äôs Bank of China Assistant Governor Yi reported it is ‚Äúhighly unlikely that there is going to be a serious reduction in China of its dollar reserves.‚ÄĚ Also, a government journal quoted PBOC Governor Zhou as saying the central bank cannot exclude the possibility of raising interest rates.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 1.9955 level and was capped around the $2.0005 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from $1.9545 to $2.0130. Sterling traded above the psychologically-important US$ 2.00 figure for the first time since 1 May. Former Chancellor of the Exchequer Brown assumed leadership of the United Kingdom yesterday as the new Prime Minister. Cable bids are cited around the US$ 1.9905 level. The euro came off vis-√†-vis the British pound as the single currency tested bids around the ‚ā§0.6720 level and was capped around the ‚ā§0.6740 level.
The Swiss franc weakened vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2310 level and was supported around the CHF 1.2270 level. Technically, today‚Äôs intraday low was right around the 76.4% retracement of the move from CHF 1.2355 to CHF 1.1995. The pair has depreciated more than 175 pips over the past several sessions on account of hawkish comments from Swiss National Bank officials, increases in the one-week repo rate, and speculation the central bank could tighten monetary policy by +50bps in September. Dollar offers are cited around the CHF 1.2350/ 95 levels. The euro and British pound came off vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6515 and CHF 2.4520 levels, respectively.
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