10 April 2006
Monday

Fundamental Outlook at 1400 GMT (EST + 0400)

€

The euro gained ground vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2125 level and was supported around the $1.2090 level.  Traders are still talking about last week’s price activity that followed a statement from European Central Bank President Trichet that he is not thinking about raising interest rates next month, contrary to the market’s expectations.  The common currency came off on that news, and fell further on Friday after March U.S. non-farm payrolls printed better-than-expected.  Those data reinforced the view the Federal Open Market Committee will raise the federal funds target rate to 5.00% on 10 May and probably higher at the end of June.  There are not many data expected today thus some traders will be focusing on the U.S. February trade balance due on Wednesday.  Structural concerns like the U.S’s mammoth current account and trade deficits have rattled the nerves of traders periodically and conventional wisdom suggests the U.S. cannot continue to run massive deficits without a corresponding significant depreciation in the U.S. dollar.  Traders are also eyeing political events in Italy as conservative Prime Minister Berlusconi is fighting to retain control of his five-year term.  Data released in the eurozone today saw French industrial output excluding construction fall 0.9% m/m.  Germany’s DIW Institute announced it expects GDP rose 0.3% in Q1 in that country. Euro offers are cited around the US$ 1.2225 level. 

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥118.50 level and was supported around the ¥117.90 level.  Technically, today’s intraday high was just above the 23.6% retracement of the move from ¥108.75 to ¥121.40.  Traders await comments from Bank of Japan Governor Fukui overnight after the central bank’s Policy Board meeting concludes.  BoJ ended its long-standing quantitative easing policy last month and is expected to lift interest rates from their current near zero per cent level some time this year.  The yen came off overnight after Vice Finance Minister Hosokawa reiterated a rise in long-term interest rates would inhibit the economy at a time when “mild deflation” continues.  Data released in Japan overnight saw February core private-sector machinery orders rise 3.4% m/m.  The Nikkei 225 stock index fell 0.61% to close at ¥17,456.58.  Dollar bids are cited around the ¥117.40 level.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥143.55 level and was supported around the ¥142.80 level.  Technically, today’s intraday high was right around the 38.2% retracement of the move from ¥144.85 to ¥142.70.  The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥206.85 and ¥205.70 levels, respectively.  The Chinese yuan appreciated vis-à-vis the U.S. dollar today as the greenback closed at CNY 8.0064 in over-the-counter trading, down from CNY 8.0111, and at CNY 8.0055 in exchange-traded activity. Traders are wondering when the pair will trade below the psychologically-important CNY 8.0000 figure. 

£

The British pound gained marginal ground vis-à-vis the U.S. dollar today as cable tested offers around the US$1.7470 level and was supported around the $1.7420 level.  Technically, the pair continues to orbit the 61.8% retracement of the move from $1.7130 to $1.7935.  Data released in the U.K. today saw March input prices remain subdued last month while output prices rose with the core output measure reaching its highest annual climb in six months.  Also, ODPM reported February house prices were up 3.6% y/y, down from January’s +4.3% y/y pace.  Cable offers are cited around the US$ 1.7530 level.  The euro was little-changed vis-à-vis the U.S. dollar today as the single currency tested offers around the £0.6950 level and was supported around the £0.6935 level.

CHF

The Swiss franc was flat vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.3025 level and was supported around the CHF 1.2975 level.  Technically, the CHF 1.3040 level represents the pair’s next upside target.  It will be a quiet data week in Switzerland and trading may take its cues from action in the euro and geopolitical events. Dollar bids are cited around the CHF 1.2885 level.  The euro and British pound gained marginal ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5760 and CHF 2.2715 levels, respectively.

AUD

The Australian dollar weakened marginally vis-à-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7255 level and was capped around the $0.7290 level.  Technically, the pair remained bid above the 23.6% retracement of the move from $0.7985 to $0.7015.  April consumer inflation expectations data will be released on Thursday.  Australian dollar offers are cited around the US$ 0.7385 level.

CAD

The Canadian dollar moved higher vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1450 level and was capped around the C$ 1.1490 level.  Technically, today’s intraday low was right around the 23.6% retracement of the move from C$ 1.1975 to $1.1300.  March housing starts data will be released in Canada today followed by the February new housing price index tomorrow. U.S. dollar offers are cited around the C$ 1.1555 level.

NZD

The New Zealand dollar moved marginally lower vis-à-vis the U.S. dollar today as kiwi tested bids around the US$ 0.6065 level and was capped around the $0.6115 level.  PMI data will be released in New Zealand on Wednesday. New Zealand offers are cited around the US$ 0.6230 level.

Gold/ Silver

Gold moved higher vis-à-vis the U.S. dollar today as the yellow metal tested offers around the US$ 598.10 level and was supported around the $588.00 figure. The pair was supported by an overnight decline in the dollar and robust oil prices.  Physical demand is boosting the pair and many believe the pair will top the psychologically-important US$ 600.00 very shortly.  Silver extended recent gains vis-à-vis the U.S. dollar today as the pair tested offers around the US$ 12.49 level and was supported around the $12.06 level. Today’s intraday high was right around a 23-year peak.

Crude oil

Crude oil appreciated vis-à-vis the U.S. dollar today as light, sweet NYMEX crude for May delivery tested offers around the US$ 68.19 level and was supported around the $67.22 level.  Rumours that the U.S. has increased military planning to possibly confront Iran’s nuclear ambitions caused the price to move higher, as did news that European foreign ministers are reviewing options for sanctions against Iran.  Traders also pushed the price higher following a view that Nigerian oil production will be slow to restart on account of militant action in that country.