NEWS / Trade Policy

Forex and Commodity Market Commentary and Analysis (11 July 2006)

?‚¬

The euro moved marginally higher vis-? -vis the U.S. dollar today as the single currency tested offers around the US$ 1.2760 level and was supported around the $1.2705 level. Technically, the pair continues to orbit the $1.2730 level, around the 50% retracement of the move from $1.2980 to $1.2480. In eurozone news, Ecofin finance ministers gave their approval for higher interest rates, a contentious issue that sometimes pits the European Central Bank against financial officials. Dutch finance minister Zalm said he backs the ECB??™s gradual rate adjustment policy while Spanish finance minister Solbes said the eurozone needs to combat inflation. Eurogroup president Juncker said the eurozone will be ???in dangerous waters??? if the common currency appreciates further. It was also reported that Slovenia will officially adopt the euro as of 1 January 2007 meaning ???EMU-12??? will now be ???EMU-13.??? German data released today saw the June wholesale price index up 0.5% m/m and 5.3% y/y. Traders await the U.S. May trade deficit data tomorrow. The White House today reduced its 2006 budget deficit projection to US$ 296 billion. Euro offers are cited around the US$ 1.2790/ 1.2860 levels.

??/ CNY

The yen moved lower vis-? -vis the U.S. dollar today as the greenback tested offers around the ??114.65 level and was supported around the ??113.90 level. Technically, today??™s intraday low was right around the 38.2% retracement of the move from ??101.65 to ??121.40. Data released in Japan today saw June consumer confidence decline to 47.2 from 49.8 in May, the second consecutive monthly decline. May current account and May trade balance data will be released tomorrow night. The Nikkei 225 stock index lost 0.51% to close at ??15,473.82. Dollar bids are cited around the ??113.75/ ??112.85 levels. The euro moved higher vis-? -vis the yen as the single currency tested offers around the ??145.85 level and was supported around the ??145.15 level. The British pound and Swiss franc depreciated vis-? -vis the yen as the crosses tested bids around the ??210.05 and ??92.65 levels, respectively. The Chinese yuan depreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.9911 in the over-the-counter market, up from CNY 7.9900, and at CNY 7.9909 in the exchange-traded market. A Chinese government agency reported China??™s economy likely expanded about 10.4% in H1 while fiscal year growth is expected around 10.2%. Chinese urban fixed asset investment was up 31.3% between January and June.

?‚¤

The British pound was off marginally vis-? -vis the U.S. dollar today as cable tested bids around the US$ 1.8365 level and was capped around the $1.8445 level. Technically, today??™s intraday high was right around the 38.2% retracement of the move from $1.9025 to $1.8090. Data released in the U.K. today saw BRC like-for-like retail sales up 2.3% y/y in June. Also, CML reported mortgage refinancing activity expanded in May. On a negative note, the U.K.??™s May trade deficit worsened sharply to -?‚¤6.8 billion from -?‚¤5.6 billion. Cable offers are cited around the US$ 1.8555 level. The euro moved higher vis-? -vis the British pound as the single currency tested offers around the ?‚¤0.6930 level and was supported around the ?‚¤0.6905 level.

CHF

The Swiss franc moved marginally higher vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2270 level and was capped around the CHF 1.2330 level. Technically, the pair continues to orbit the 50% retracement of the move from CHF 1.1285 to CHF 1.3285. Dollar bids are cited around the CHF 1.2230 level. The euro and British pound lost ground vis-? -vis the Swiss franc as the crosses tested bids around the CHF 1.5645 and CHF 2.2600 levels, respectively.

AUD

The Australian dollar appreciated vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7520 level and was supported around the $0.7460 level. Technically, today??™s intraday high was right around the 38.2% retracement of the move from $0.6770 to $0.7985. Data released in Australia today saw the NAB June business confidence index remain unchanged at 9.0. Many traders believe the improving housing market will result in more pressure on Reserve Bank of Australia to lift interest rates in the coming months. Australian dollar offers are cited around the US$ 0.7615 level.

CAD

The Canadian dollar moved lower vis-? -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1345 level and was supported around the $1.1220 level. Technically, today??™s intraday high was just below the 50% retracement of the move from $1.1775 to $1.0925 level. As expected, Bank of Canada decided to keep interest rates unchanged at 4.25%. Bank of Canada noted core inflation reached its two per cent target level ???slightly sooner than expected??? and will release its next economic report on Thursday. U.S. dollar offers are cited around the C$ 1.1450 level.



NZD

The New Zealand dollar moved higher vis-? -vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6145 level and was supported around the $0.6100 figure. Data released in New Zealand today saw the NZIER quarterly business expectations index remain mostly unchanged in the three months to June. New Zealand dollar offers are cited around the US$ 0.6180 level.

Gold/ Silver

Gold appreciated vis-? -vis the U.S. dollar today as the yellow metal tested offers around the US$ 633.40 level and was supported around the US$ 622.00 figure. Asian demand was cited overnight and news of possible terror attacks in Mumbai saw some demand materialize in North American dealing. Silver moved higher vis-? -vis the U.S. dollar as the pair tested offers around the US$ 11.34 level and was supported around the $11.00 figure.

Crude Oil

Crude oil moved higher vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for August delivery tested offers around the US$ 74.47 level and was supported around the $73.37 level. News that Iran indicated it does not want to suspend its nuclear enrichment activities kept the pair bid. Iranian and European officials are meeting today in Europe. Traders await the release of weekly oil inventories data tomorrow in the U.S.