Monday August 6, 2007 - 16:16:59 GMT
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GCI Financial - www.gcitrading.com
Forex and Commodity Market Commentary and Analysis (6 August 2007)
The euro appreciated vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.3840 level and was supported around the $1.3790 level. Technically, todayâ€™s intraday low was right around the 23.6% retracement of the move from $1.3260 to $1.3850. Traders await tomorrowâ€™s Federal Open Market Committee interest rate announcement and policy statement. Most traders believe the FOMC will keep rates unchanged but the primary focus is what the Fed will say about the ongoing problems in U.S. credit markets, particularly with regard to the subprime mortgage market. Many traders expect the Fed will move closer to a neutral policy bias and subtly note that it may be prepared to lower interest rates if need be. Other traders believe the FOMC should not bail out the financial markets with easier credit. The most likely scenario is that the Fed will note inflation seems to be moderating and even though gross domestic product growth remains strong, the Fed is closely monitoring credit conditions that could exacerbate the current housing recession. The weaker-than-expected July housing numbers released on Friday could give the Fed a little bit of ammunition in their policy statement. In eurozone news, German manufacturing orders surged in June, up 4.6% m/m. The most likely scenario involving the European Central Bank is for a monetary tightening of +25bps next month, especially given ECB President Trichetâ€™s recent remarks. Euro bids are cited around the US$ 1.3715 level.
The yen appreciated vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥117.15 level and was capped around the Â¥118.15 level. Technically, todayâ€™s intraday low was just below the 76.4% retracement of the move from Â¥115.15 to Â¥124.15. Data released in Japan today saw the June index of leading economic indicators rise to 80.0 in June from 40.9 in May while the coincident index improved to 77.8 from 60.0 in May. The Japanese government lifted its GDP forecast for the fiscal year to March 2008 from +2.0% to +2.1% on account of stronger-than-expected capital investment growth. The government, however, reduced its inflation forecast to 0% in the fiscal year to March 2008 from the previous estimate of +0.5%. The Nikkei 225 stock index lost 0.39% to close at Â¥16,914.46. Dollar bids are cited around the Â¥116.55 level. The euro moved lower vis-Ã -vis the yen as the single currency tested bids around the Â¥162.00 figure and was capped around the Â¥163.25 level. The British pound came off vis-Ã -vis the yen as sterling tested bids around the Â¥238.90 level and was capped around the Â¥240.70 level while the Swiss franc moved higher vis-Ã -vis the yen and tested offers around the Â¥99.60 level. In Chinese news, the yuanâ€™s central parity rate was set at CNY 7.5598 vis-Ã -vis the U.S. dollar, down from CNY 7.5683. The government reported consumer price inflation for 2007 is likely to be under 4% with H2 economic growth around 11.3%.
The British pound depreciated vis-Ã -vis the U.S. dollar today as cable tested bids around the US$ 2.0285 level and was capped around the $2.0460 level. Technically, todayâ€™s intraday low was right around the 23.6% retracement of the move from $2.0655 to $2.0180. Data released in the U.K. today saw June manufacturing output up 0.2% m/m, the fourth consecutive monthly rise. This means output has registered its longest continuous expansion since 1999. Most traders believe Bank of Englandâ€™s Monetary Policy Committee will tighten policy by at least another +25bps this year, probably in September or October. Cable bids are cited around the US$ 2.0135 level. The euro moved higher vis-Ã -vis the British pound as the single currency tested offers around the â‚¤0.6810 level and was supported around the â‚¤0.6755 level.
The Swiss franc gained ground vis-Ã -vis the U.S. dollar today as the greenback tested bids around the CHF 1.1815 level and was capped around the CHF 1.1885 level. The pair has not been this weak since April 2005 and chartists are eyeing the CHF 1.1755 level as the pairâ€™s next downside target. The July unemployment rate will be released on Wednesday. Most traders expect Swiss National Bank will raise interest rates by +25bps next month. Dollar bids are cited around the CHF 1.1760 level. The euro and British pound were lower vis-Ã -vis the Swiss franc as the crosses tested bids around the CHF 1.6350 and CHF 2.4055 levels, respectively.
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