Friday July 6, 2007 - 13:52:33 GMT
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Forex and Commodity Market Commentary and Analysis (6 July 2007)
The euro depreciated vis-√†-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3565 level and was capped around the $1.3600 figure. Technically, today‚Äôs intraday low was just above the 23.6% retracement of the move from $1.3260 to $1.3660. Data released in the U.S. saw June non-farm payrolls up 132,000, right around expectations but down from an upwardly revised 190,000 in May and 122,000 in April. Notably, monthly jobs growth has averaged about US$ 145,000 this year. The June unemployment rate was unchanged at 4.5% and average hourly earnings were up 0.3% to US$ 17.38, up 3.9% y/y. The earnings data suggest the relatively tight U.S. labour markets are not resulting in significant pressures on labour costs. Today‚Äôs data are the latest evidence that the U.S. economy strengthened late in the first half of the year after decelerating in Q4 2006 and Q1 2007. San Francisco Fed President Yellen last night said the Federal Reserve‚Äôs monetary policy ‚Äúis likely to produce enough slack in goods and labor markets to relieve inflationary pressures.‚ÄĚ Yellen added ‚ÄúIf labor markets are indeed on the tight side, and if they remain there, then there may be reason for concern about the risk of building inflationary pressures.‚ÄĚ In eurozone news, German May manufacturing orders surged 3.2% m/m. Euro bids are cited around the US$ 1.3520 level.
The yen extended recent losses vis-√†-vis the U.S. dollar today as the greenback tested offers around the ¬•123.55 level and was supported around the ¬•122.85 level. Technically, today‚Äôs intraday low was right around the 38.2% retracement of the move from ¬•120.75 to ¬•124.15. Bank of Japan Governor Fukui spoke overnight and said ‚ÄúThe year-on-year rise in core consumer prices, which excludes prices of fresh food but includes energy prices, could stay around zero in the short run. From a longer-term perspective, consumer prices are projected to follow a positive trend (upwards as the gap in production continues to improve).‚ÄĚ Most traders believe Bank of Japan will raise rates another +25bps this year, possibly as early as August. Data released in Japan today saw June foreign exchange reserves rise to US$ 913.57 billion, up from US$ 911.14 billion in May. BoJ‚Äôs quarterly survey on regional economies reported Japan‚Äôs nine regional economies continue to recover economically, supported by the corporate and household sectors. The Nikkei 225 stock index lost 0.44% to close at ¬•18,140.94. Dollar bids are cited around the ¬•122.45 level. The euro gained ground vis-√†-vis the yen as the single currency tested offers around the ¬•167.70 level and was supported around the ¬•167.00 figure. The British pound appreciated vis-√†-vis the yen as sterling tested offers around the ¬•247.95 level while the Swiss franc weakened vis-√†-vis the yen as the pair tested bids around the ¬•100.90 level. The Chinese yuan came off vis-√†-vis the U.S. dollar as the greenback closed at CNY 7.6010 in the over-the-counter market, up from CNY 7.5984. Data released in China today saw actual foreign direct investment up an estimated US$ 30 billion in H1 2007. Also, Q2 business confidence was up slightly to a record 143.1.
The British pound came off vis-√†-vis the U.S. dollar today as cable tested bids around the US$ 2.0055 level and was capped around the $2.0125 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $1.9620 to $2.0200. Data released in the U.K. today saw May manufacturing output rise 0.4% m/m, exceeding forecasts and the highest level since August 2001. Cable bids are cited around the US$ 1.9980 level. The euro moved higher vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6770 level and was supported around the ‚ā§0.6755 level.
The Swiss franc came off vis-√†-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2230 level and was supported around the CHF 1.2170 level. Technically, today‚Äôs intraday high was right around the 50% retracement of the move from $1.1995 to $1.2475. Data released in Switzerland today saw the June unemployment rate print at 2.5%, down from 2.7% in April. Dollar offers are cited around the CHF 1.2245/ 90 levels. The euro and British pound appreciated vis-√†-vis the Swiss franc as the crosses tested offers around the CHF 1.6600 and CHF 2.4545 levels, respectively.
The Australian dollar gained ground vis-√†-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8575 level and was supported around the $0.8550 level. Technically, today‚Äôs intraday low was right around the 23.6% retracement of the move from $0.8355 to $0.8610. Australian dollar bids are cited around the US$ 0.8510 level. The New Zealand dollar escalated vis-√†-vis the U.S. dollar as the kiwi tested offers around the US$ 0.7840 level and was supported around the $0.7805 level. New Zealand dollar bids are cited around the US$ 0.7760 level.
The Canadian dollar strengthened vis-√†-vis the U.S. dollar today as the greenback tested bids around the C$ 1.0485 level and was capped around the C$ 1.0565 level. Today‚Äôs intraday low was the pair‚Äôs weakest showing in a couple of decades. Data released in Canada today saw 35,000 new jobs created last month with the unemployment rate steady at 6.1% for the fifth consecutive month. Many traders believe today‚Äôs employment report will force Bank of Canada to lift its main interest rate next week for the first time in one year. U.S. dollar offers are cited around the C$ 1.0635 level.
Gold came off vis-√†-vis the U.S. dollar today as the yellow metal tested bids around the US$ 645.75 level and was capped around the $650.95 level. Some intraday gains by the U.S. dollar contributed to gold‚Äôs intraday weakness. Silver gained marginal ground vis-√†-vis the U.S. dollar as the pair tested offers around the US$ 12.55 level and was supported around the $12.36 level.
Crude oil appreciated vis-√†-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for August delivery tested offers around the US$ 72.73 level and was supported around the $71.58 level. Nigerian militants kidnapped and threatened to kill a three-year old British girl yesterday and this led to higher prices. Other oil workers were kidnapped this week and a main militant group ended its ceasefire with the government this week. U.S. energy inventories data released yesterday evidenced a surprising increase in crude oil stocks last week.
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