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U.S. Forex Market Commentary

Tue, Jan 16 2007, 15:19 GMT

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EURO

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2990 level and was supported around the $1.2920 level.  Technically, today’s intraday low was right around the 50% retracement of the move from $1.2480 to $1.3365.  Data released in the U.S. today saw the January Empire State manufacturing index print lower-than-expected at 9.13, off from a downwardly revised previous reading of 22.19.  In eurozone news, the German January ZEW headline index printed at 70.6, above expectations, while the economic expectations indicator came in around -3.6, above the expected -10 level.  European Central Bank President Trichet spoke in Slovenia yesterday and said he had “nothing to add” to his comments from 11 January regarding ECB monetary policy.  Euro bids are cited around the US$ 1.2885 level.

JPN/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥120.75 level and was supported around the ¥120.20 level.  The pair reached its highest level since December 2005 on a Japanese television story that Bank of Japan officials are coordinating a delay in rate hikes.  Until this report, most traders believed the central bank would be lifting the overnight call rate by +25bps to 0.50% at its two-day Policy Board meeting that begins tonight.  The possibility of a delay in higher rates gives traders less incentive to unwind their short yen carry trades.  Data released in Japan today saw November industrial output up +0.8% m/m while the December wholesale goods price index rose 2.5% y/y, below forecast.  The Nikkei 225 stock index lost 0.04% to close at ¥17,202.46.  Dollar bids are cited around the ¥119.60 level.  The euro appreciated vis-à-vis the yen as the single currency tested offers around the ¥156.30 level and was supported around the ¥155.70 level.  The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥237.25 and ¥96.85 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.7900 in the over-the-counter market, down from CNY 7.7918 level.  Data released in China today saw the December enterprise commodity price index – a measure of wholesale prices – rise 1.1% m/m and 5.1% y/y.

STERLING

The British pound escalated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.9705 level and was supported around the $1.9620 level.  Technically, today’s intraday low was right around the 61.8% retracement of the move from $1.9845 to $1.9260 and today’s intraday high was right around the 76.4% retracement of the same range. Data released in the U.K. today saw the December consumer price index print at 3.0%, its highest level since 1997.  Traders are citing this as a reason why Bank of England’s Monetary Policy Committee lifted interest rates last week in a surprise move and many believe these data could spur the central bank into lifting rates again in the months ahead.  The jump in inflation may result in higher wage deals during this month’s pay round negotiations.  Notably, the wider RPI measure of inflation vaulted higher to 4.4%, its highest level since December 1991.  Cable bulls are highlighting a story that BoE’s MPC will have access to an advanced estimate of U.K. inflation data when they convene next month.  BoE MPC member Sentance spoke against a rise in U.K. minimum wages, suggesting such a policy could raise unemployment.  Cable bids are cited around the US$ 1.9555 level.  The euro gained ground vis-à-vis the British pound as the single currency tested offers around the ₤0.6605 level and was supported around the ₤0.6580 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2415 level and was capped around the CHF 1.2495 level.  Technically, today’s intraday low was just below the 38.2% retracement of the move from CHF 1.3235 to CHF 1.1920.  Dollar offers are cited around the CHF 1.2520 level.  The euro and British pound weakened vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6125 and CHF 2.4415 levels, respectively.

AUD

The Australian dollar moved higher vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7850 level and was supported around the US$ 0.7820 level.  Most traders expect Reserve Bank of Australia will lift interest rates next month.  Australian dollar bids are cited around the US$ 0.7795 level.

CAD

The Canadian dollar appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1645 level and was capped around the C$ 1.1690 level.  Technically, today’s intraday high was right around the 61.8% retracement of the move from C$ 1.1625 to C$ 1.1800.  As expected, Bank of Canada left its overnight target rate unchanged at 4.25%.  BoC reported “Final domestic demand in Canada has continued to contribute strongly to growth. Inflation has evolved largely in line with the Bank's expectations in the October Monetary Policy Report (MPR), with total CPI inflation slightly lower than projected and core inflation slightly higher. The Bank judges that at the end of 2006, the Canadian economy was operating at, or just above, its production capacity.”  U.S. dollar offers are cited around the C$ 1.1715 level.

NZD

The New Zealand dollar gained marginal ground vis-à-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6975 level and was supported around the $0.6945 level.  Technically, today’s intraday high was just above the 50% retracement of the move from $0.7095 to $0.6840 level.  Data released in New Zealand today saw NZIER’s quarterly survey of business opinion evidence a sharp improvement in the number of firms that expect an improvement in general business conditions.  New Zealand dollar bids are cited around the US$ 0.6900 figure.

Published on  Tue, Jan 16 2007, 15:18 GMT

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