Forex and Commodity Market Commentary and Analysis (22 August 2006)

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The euro weakened vis-?�-vis the U.S. dollar today as the single currency tested bids around the US$1.2795 level and was capped around the $1.2895 level. Technically, today??�s intraday high was right around the 61.8% retracement of the move from $1.3665 to $1.1640. The common currency moved lower after the release of Germany??�s ZEW economic expectations index fell a substantial 20.7 index points to -5.6 this month, its lowest print since June 2001. This five-year low is of concern to traders and Thursday??�s Ifo data will be closely parsed to see if a pullback in sentiment is widespread or perhaps isolated. Other EMU-12 data released today saw French provisional Q2 GDP growth up 1.1% q/q, its highest level since Q4 2000. Additionally, EMU-12 June industrial orders were off 2.5% m/m and up 5.2% y/y. It was also learned that the EMU-12 current account balance for June came in at +?��4.0 billion, up from May??�s -?��7.6 billion reading. Fed speakers on the docket today include Atlanta Fed President Guynn and Chicago Fed President Moskow. Fed Chairman Bernanke speaks on Friday and his remarks will be reviewed closely to see if he offers any clues about the direction of monetary policy. Euro bids are cited around the US$ 1.2755 level.

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The yen moved lower vis-?�-vis the U.S. dollar today as the greenback tested offers around the ??116.45 level and was supported around the ??115.80 level. Technically, today??�s intraday low was right around the 23.6% retracement of the move from ??109.00 to ??117.85. Data released in Japan today saw July supermarket sales down 3.2% y/y while the June all-industries index was up 0.1% m/m. Traders are also reluctant to assume long yen risk on account of inflamed tensions on the Korean peninsula. North Korea today indicated it is considering a ???pre-emptive attack??? against a joint U.S. ??� South Korean military drill that North Korea has labeled a ???war action.??? Japan??�s proximity to the Korean peninsula renders the yen a liability during periods of heightened regional tensions. The Nikkei 225 stock index climbed 1.33% to close at ??16,181.17. Dollar bids are cited around the ??115.45 level. The euro moved lower vis-?�-vis the yen as the single currency tested bids around the ??148.95 level and was capped around the ??149.65 level. The British pound moved higher vis-?�-vis the yen as sterling tested offers around the ??220.10 level while the Swiss franc moved lower vis-?�-vis the yen and tested bids around the ??94.40 level. The Chinese came off vis-?�-vis the U.S. dollar as the greenback closed at CNY 7.9664 in the over-the-counter market, up from CNY 7.9656, and at CNY 7.9651 in the exchange-traded market. Data released in China overnight industrial firms??� profits climb 28.6% y/y in the January ??� July period.

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The British pound depreciated vis-?�-vis the U.S. dollar today as cable tested bids around the US$ 1.8870 level and was capped around the $ 1.8945 level. Chartists are eyeing the $1.8860 level as the pair??�s next downside target followed by the $1.8775 level. A U.K. wage survey today revealed very little wage effects from the recent spike in inflationary pressures. Cable bids are cited around the US$ 1.8780 level. The euro moved lower vis-?�-vis the British pound as the single currency tested bids around the ?��0.6775 level and was capped around the ?��0.6810 level.

CHF

The Swiss franc came off vis-?�-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2335 level and was supported around the CHF 1.2240 level. Technically, today??�s intraday high was right around the 38.2% retracement of the move from CHF 1.1920 to CHF 1.2595. Data released in Switzerland today saw the July trade surplus print at CHF 1.421 billion, up from CHF 622.8 million one year ago. Dollar offers are cited around the CHF 1.2425 level. The euro and British pound moved higher vis-?�-vis the Swiss franc as the crosses tested offers around the CHF 1.5795 and CHF 2.3300 levels, respectively.

AUD

The Australian dollar was mostly unchanged vis-?�-vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7610 level and was capped around the $0.7635 level. Today??�s intraday range was tight and many traders continue to ponder the Reserve Bank of Australia??�s next interest rate move. Australian dollar bids are cited around the US$ 0.7525 level.

CAD

The Canadian dollar appreciated vis-?�-vis the U.S. dollar today as the greenback tested bids around the C$ 1.1145 level and was capped around the $1.1200 figure. Technically, today??�s intraday high was just above the 50% retracement of the move from $1.0925 to $1.1455. Data released in Canada today saw the July consumer prices index rise 2.4% y/y, down from June??�s +2.5% tally. U.S. dollar offers are cited around the C$ 1.1255 level.

NZD

The New Zealand dollar moved lower vis-?�-vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6360 level and was capped around the $0.6410 level. Technically, today??�s intraday low was just below the 23.6% retracement of the move from $0.6145 to $0.6440. New Zealand dollar offers are cited around the US$ 0.6505 level.

Gold/ Silver

Gold extended recent losses vis-?�-vis the U.S. dollar today as the yellow metal tested bids around the US$ 622.50 level and was capped around the $ 629.50 level. The market remains choppy and news that Germany??�s Bundesbank does not plan to sell any of its gold holdings weighed on the pair today. Silver slumped vis-?�-vis the U.S. dollar as the pair tested bids around the US$ 12.04 level and was capped around the $12.44 level.

Crude Oil

Crude oil depreciated vis-?�-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for October delivery tested bids around the US$ 72.93 level and were capped around the $ 73.46 level. News that Iran may have today responded to the United Nations??� request for suspension of its nuclear enrichment activities with a ???new formula??? has traders curious and reluctant to assume more risk. Tomorrow??�s weekly U.S. inventories data will also be closely watched by traders.