Friday August 3, 2007 - 16:36:33 GMT
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Forex and Commodity Market Commentary and Analysis (3 August 2007)
The euro appreciated vis-√†-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3780 level and was supported around the $1.3685 level. Stops were hit above the $1.3760 level, representing the 61.8% retracement of the move from $1.3260 to $1.3850. Data released in the U.S. today saw July non-farm payrolls growth of 92,000, far below most estimates of 135,000 new jobs growth. Likewise, the unemployment rate moved higher to 4.6% from 4.5% and is at its highest level since January while average hourly earnings were up +0.3% m/m and are up +3.9% y/y, matching June‚Äôs gain. Moreover, there was a cumulative downward revision to June‚Äôs and May‚Äôs non-farm payrolls tallies of 8,000 workers. Notably, the services sector added 104,000 new jobs last month, down from 135,000 in June and 199,000 in May. These data do not offer traders much insight about the credit market problems that surfaced in the subprime mortgage market last month. Other data released in the U.S. today saw the July ISM services index fall back to 55.8 from 59.0. The new orders, employment, and prices paid sub-indices also fell. In eurozone news, the EMU-13 July services PMI index remained unchanged at 58.3 while eurozone June retail sales were up +0.9% m/m and +0.4% y/y, less-than-expected. European Central Bank President Trichet reiterated he is ‚Äústrongly vigilant‚ÄĚ on price risks and added ‚Äúthere is quite big a probability that we will hike (rates) at our next meeting.‚ÄĚ Most traders believe the ECB will lift the repo rate by +25bps next month. Euro bids are cited around the US$ 1.3625 level.
The yen gained marginal ground vis-√†-vis the U.S. dollar today as the greenback tested bids around the ¬•118.50 level and was capped around the ¬•119.30 level. Technically, today‚Äôs intraday low was right around the 61.8% retracement of the move from ¬•115.15 to ¬•124.15. Traders continue to believe the yen will benefit from the subprime mortgage meltdown in the U.S. as traders unwind carry trades. Also, most dealers continue to believe Bank of Japan will lift the overnight call rate by +25bps to +0.75% by the end of the year, with a move coming as early as this month. Finance minister Omi told his APEC counterparts that exchange rates should ‚Äúbe set by economic fundamentals.‚ÄĚ The Nikkei 225 stock index lost 0.03% to close at ¬•16,979.86. Dollar bids are cited around the ¬•117.25 level. The euro came off vis-√†-vis the yen as the single currency tested bids around the ¬•162.85 level and was capped around the ¬•163.50 level. The British pound and Swiss franc depreciated vis-√†-vis the yen as the crosses tested bids around the ¬•241.45 and ¬•98.65 levels, respectively. The Chinese yuan appreciated vis-√†-vis the U.S. dollar today as the greenback closed the week at CNY 7.5670, down from CNY 7.5750. European Central Bank President Trichet today said ‚Äúthe Chinese currency and those of emerging economies in Asia as a whole should be more flexible.‚ÄĚ Finance minister Jin Renging was quoted as saying ‚ÄúChina must perform our reforms in the exchange regime. We will not follow others‚Äô words. We have continued flexibility since July 2005.‚ÄĚ
The British pound rallied vis-√†-vis the U.S. dollar today as cable tested offers around the US$ 2.0420 level and was supported around the $2.0340 level. Technically, today‚Äôs intraday high was right around the 23.6% retracement of the move from $1.9620 to $2.0655. Data released in the U.K. today saw the July CIPS PMI services index fall to 57.0 from 57.7 in June. Cable bids are cited around the US$ 2.2060 level. The euro gained ground vis-√†-vis the British pound as the single currency tested offers around the ‚ā§0.6730 level and was supported around the ‚ā§0.6720 level.
The Swiss franc appreciated vis-√†-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1920 level and was capped around the CHF 1.2070 level. The pair weakened to its lowest level since 8 December 2006. Part of the pair‚Äôs gains resulted from growing risk aversion on the heels of the problems in the U.S. credit markets. Data released in Switzerland today saw July consumer price inflation off 0.6% m/m and up 0.7% y/y. Dollar offers are cited around the CHF 1.2080 level. The euro and British pound depreciated vis-√†-vis the Swiss franc as the crosses tested bids around the CHF 1.6425 and CHF 2.4335 levels, respectively.
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