Forex and Commodity Market Commentary and Analysis (23 June 2006)

?��

The euro slumped vis-?�-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2480 level and was capped around the $1.2585 level. Stops were hit below the $1.2560 level, representing the 50% retracement of the move from $1.3480 to $1.1640. Data released in the U.S. today saw the May headline durable goods orders fall 0.3% while the ex-transportation component was up +0.7%. The common currency came off overnight after market rumours started circulating that the Federal Reserve met with bond market participants to prepare them for a +50bps monetary tightening. Most traders do not anticipate a +50bps move at next week??�s meeting but the fed funds futures rate is now discounting about a 90% chance the policy will be tightened by +50bps over the next two meetings, up from 60% earlier in the week. The Fed faces an uphill public relations battle as some dealers are expressing dissatisfaction with Chairman Bernanke??�s communications style. Also, Fed policymakers have been quite hawkish and many economists are citing anecdotal evidence ??� and economic data ??� that are pointing to a slower Q2 GDP growth rate. Euro offers are cited around the US$ 1.2650 level.

??/ CNY

The yen moved lower vis-?�-vis the U.S. dollar today as the greenback tested offers around the ??116.55 level and was supported around the ??115.75 level. The pair reached levels not seen since 24 April and traders are eyeing the ??116.75 level as the pair??�s next upside target. Bank of Japan Governor Fukui again brushed aside calls for him to resign in the wake of an investment fund scandal. Some traders moved into yen overnight on speculation that a People??�s Bank of China statement would relate to the yuan but the report instead focused on global finance. Data released in Japan overnight saw May supermarket sales off 3.4% y/y to ??1.16 trillion. The Nikkei 225 stock index shed 0.08% to close at ??15,124.04. Dollar bids are cited around the ??115.30 level. The euro moved lower vis-?�-vis the yen as the single currency tested bids around the ??145.20 level and was capped around the ??146.15 level. The British pound and Swiss franc lost ground vis-?�-vis the yen as the crosses tested bids around the ??210.95 and ??92.85 levels, respectively. The Chinese yuan came off vis-?�-vis the U.S. dollar as the greenback closed at CNY 8.0002 in over-the-counter trading, up from CNY 7.9964, and at CNY 7.9987 in the exchange-traded market. People??�s Bank of China monetary policy committee member Yu reported ???The pace of yuan appreciation is very likely to grow.???

?��

The British pound extended recent losses vis-?�-vis the U.S. dollar today as cable tested bids around the US$ 1.8125 level and was capped around the $1.8310 level. Stops were hit below the $1.8165 level, representing the 23.6% retracement of the move from $1.3680 to $1.9550. Less-than-hawkish June Bank of England Monetary Policy Committee meeting minutes released this week and the surprise death of hawkish MPC member Walton contributed to sterling??�s decline. The pair appears poised to close the week with a loss of about 300 pips. Cable offers are cited around the US$ 1.8300 figure. The euro gained marginal ground vis-?�-vis the British pound as the single currency tested offers around the ?��0.6885 level and was supported around the ?��0.6870 level.

CHF

The Swiss franc weakened vis-?�-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2525 level and was supported around the CHF 1.2415 level. Technically, today??�s intraday high was right around the 38.2% retracement of the move from CHF 1.1285 to CHF 1.3285. Data released in Switzerland today saw May producer and import prices rise 0.6% m/m and 2.8% y/y. Dollar bids are cited around the CHF 1.2320 level. The euro and British pound moved lower vis-?�-vis the Swiss franc as the crosses tested bids around the CHF 1.5615 and CHF 2.2690 levels, respectively.

AUD

The Australian dollar moved lower vis-?�-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7305 level and was capped around the $0.7350 level. Australian dollars are cited around the US$ 0.7385 level.

CAD

The Canadian dollar moved lower vis-?�-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1285 level and was capped at the C$ 1.1165 level. Stops were hit above the C$ 1.1250 level, representing the 38.2% retracement of the move from C$1.1770 to $1.0925. U.S. dollar offers are cited around the C$ 1.1350 level.

NZD

The New Zealand dollar moved lower vis-?�-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6040 level and was capped around the $0.6115 level. Data released in New Zealand today confirmed New Zealand??�s current account deficit has widened to 9.3% of GDP, a staggering percentage. New Zealand dollar offers are cited around the US$ 0.6115 level.

Gold/ Silver

Gold moved higher vis-?�-vis the U.S. dollar today as the yellow metal tested offers around the US$ 585.10 level and was supported around the $ 572.05 level. Reports that People??�s Bank of China may sell some U.S. dollar foreign reserves for gold is supporting the dollar, as is the situation involving Iran. Silver moved higher vis-?�-vis the U.S. dollar as the pair tested offers around the US$ 10.35 level and was supported around the $10.01 level.

Crude Oil

Crude oil jumped higher vis-?�-vis the U.S. dollar today as light, sweet NYMEX crude futures for August delivery tested offers around the US$ 71.09 level and was supported around the $70.20 level. The Bush administration yesterday called on Iran to ???respond swiftly??? to the incentive proposals put forth by the global community on 6 June. Data released this week saw U.S. gasoline reserves increase 300,000 to 213.4 million in the week to 16 June.