21 August 2006
Monday
Fundamental Outlook at 1400 GMT (EST + 0400)
€
The euro motored higher vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2920 level and was supported around the $1.2825 level. Stops were reached above the $1.2890 level, representing the 61.8% retracement of the move from $1.3665 to $1.1640. Data released in the eurozone today saw the EMU-12 foreign trade balance move to a €2.0 billion surplus in June from May’s €3.2 billion deficit. Bundesbank released its August monthly report and indicated “the upward trend of the German economy has gained in strength considerably in the course of the year.” European Central Bank President Weber noted the “dynamic” German economy may “possibly” realize economic growth of 2% this year. Traders await the release of this week’s ZEW and Ifo surveys. In U.S. news, Chicago Fed President Moskow and Atlanta Fed President Guynn will speak tomorrow and Fed Chairman Bernanke will speak this Friday at the Fed’s annual Jackson Hole symposium. Euro bids are cited around the US$ 1.2855 level.
¥/ CNY
The yen lost marginal ground vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥115.30 level and was capped around the ¥115.80 level. Technically, the pair traded about fifteen pips below the 38.2% retracement of the move from ¥117.85 to ¥113.95. Data released in Japan today saw July convenience store sales fall 5.2% y/y. The yen had a rough night in its crosses and some dealers attribute that to Iran’s announcement that it will continue its nuclear enrichment activities. Traders are concerned that economic sanctions against Iran will include measures against its oil industry and Japan imports virtually all of the oil it consumes, hence some selling pressure on the yen. Additionally, most traders believe Bank of Japan is in no hurry to raise interest rates further, although most players expect the central bank to lift the unsecured overnight call rate by about +25bps by the end of 2006. The Nikkei 225 stock index lost 0.85% to close at ¥15,969.04. Dollar bids are cited around the ¥114.90 level. The euro moved to fresh lifetime lows vis-à-vis the yen as the single currency tested offers around the ¥149.45 level and was supported around the ¥148.45 level. The British pound and Swiss franc gained ground vis-à-vis the yen as the crosses tested offers around the ¥219.65 and ¥94.70 levels, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.9656 in the over-the-counter market, down from CNY 7.9745, and at CNY 7.9642 in the exchange-traded market. The National Development and Reform Commission issued a report overnight predicting People’s Bank of China may raise interest rates in the fourth quarter.
₤
The British pound powered higher vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.8995 level and was supported around the US$ 1.8805 level. Stops were triggered above the $1.8960 level, representing the 76.4% retracement of the move from $1.9550 to $1.7045. Traders largely disregarded data released by Rightmove overnight that saw asking prices for U.K. homes off 1.6% y/y in August, the first decline this year. Cable bids are cited around the US$ 1.8915 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.6795 level and was capped around the ₤0.6825 level.
CHF
The Swiss franc notched significant gains vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2180 level and was capped around the CHF 1.2345 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from CHF 1.1920 to CHF 1.2595 while today’s intraday low was right around the 61.8% retracement of the same range. Data released in Switzerland today saw July producer and import prices climb 0.2% m/m and 2.9% y/y. U.S. dollar offers are cited around the CHF 1.2285 level. The euro and British pound moved lower vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5765 and CHF 2.3115 levels, respectively.
AUD
The Australian dollar moved higher vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7645 level and was supported around the US$ 0.7580 level. Technically, today’s intraday high is right around the 50% retracement of the move from $0.7715 to $0.7565. Australian dollar bids are cited around the US$ 0.7590 level.
CAD
The Canadian dollar moved higher vis-à-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1165 level and was capped around the C$ 1.1255 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from C$ 1.1770 to $1.0925. The Canadian dollar shrugged off economic data released today that saw June retail sales fall 0.2% to C$ 32.5 billion, the second consecutive monthly decline. U.S. dollar offers are cited around the C$ 1.1250/ 1.1330 levels.
NZD
The New Zealand dollar moved higher vis-à-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6425 level and was supported around the $0.6375 level. New Zealand dollar offers are cited around the $0.6505 level.
Gold/ Silver
Gold moved higher vis-à-vis the U.S. dollar today as the yellow metal tested offers around the US$ 626.65 level and was supported around the $ 614.05 level. The pullback in the U.S. dollar and the move higher in oil prices contributed to the pair’s gains. Traders await the details regarding a United Nations-supported peacekeeping force in Lebanon. Silver moved higher vis-à-vis the U.S. dollar as the pair tested offers around the US$ 12.45 level and was supported around the $12.04 level.
Crude Oil
Crude oil moved higher vis-à-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for October delivery tested offers around the US$ 72.98 level and was supported around the $72.08 level. The pair moved higher after Iran test-fired missiles this weekend and announced it will defy the international community by continuing its nuclear enrichment activities. Iran is expected to provide a formal response to a European set of incentives and penalties tomorrow and is expected to maintain its nuclear activities after the 31 August deadline to end them.
