NEWS / Indicators

Forex and Commodity Market Commentary and Analysis (20 October 2006)

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The euro was off marginally vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.2600 figure and was capped around the $1.2640 level. Today??™s range was limited but this follows a strong upmove for the common currency yesterday after the Philadelphia Fed manufacturing survey was released. The prices paid, prices received, and employment sub-indices all moved lower, suggesting upcoming ISM manufacturing data may not impress. Traders await the Federal Open Market Committee??™s interest rate decision on Tuesday with most market participants believing the Fed will keep rates on hold. Important data releases next week in the U.S. include durable goods orders, Q3 GDP, and new and existing home sales. In eurozone news, the October Belgian consumer confidence indicator improved to +2 from -2 and some dealers believe this could presage strong German and eurozone confidence sentiment. Euro bids are cited around the US$ 1.2560 level.

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The yen came off vis-? -vis the U.S. dollar today as the greenback tested offers around the ??118.40 level and was supported around the ??118.10 level. Today??™s range was very thin, especially following yesterday??™s sell-off. Bank of Japan Governor Fukui reiterated the ???prolonged economic expansion is expected to continue??? and mentioned the core consumer price index is ???on an uptrend.??? He added ???If the domestic economy would go in line with our economic outlook for the future, interest rate adjustments will be gradual.??? The Nikkei 225 stock index gained 0.61% to close at ??16,651.63. Dollar bids are cited around the ??117.95 level. The euro moved higher vis-? -vis the yen as the single currency tested offers around the ??149.60 level and was supported around the ??149.05 level. The British pound and Swiss franc moved higher vis-? -vis the yen as the crosses tested offers around the ??223.05 and ??94.20 levels, respectively. The Chinese yuan appreciated vis-? -vis the U.S. dollar as the greenback closed at CNY 7.9025 in the over-the-counter market, down from CNY 7.9102, and at CNY 7.9022 in the exchange-traded market.
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The British pound moved higher vis-? -vis the U.S. dollar today as cable tested offers around the US$ 1.8855 level and was supported around the $1.8755 level. Stops were reached above the $1.8030 level, representing the 50% retracement of the move from $1.9145 to $1.8515. Data released in the U.K. today saw preliminary Q3 GDP expand 0.7% q/q and 2.8% y/y, consistent with the long-term growth rate and above Q2??™s 2.6% y/y growth rate. Also, August services output was up 0.8% m/m. Collectively, these data support the belief that Bank of England??™s Monetary Policy Committee will tighten policy on 9 November. Cable bids are cited around the US$ 1.8755 level. The euro moved lower vis-? -vis the British pound as the single currency tested bids around the ?‚¤0.6690 level and was capped around the ?‚¤0.6730 level.

CHF

The Swiss franc moved marginally lower vis-? -vis the U.S. dollar today as the greenback tested offers around the CHF 1.2600 figure and was supported around the CHF 1.2555 level. The pair gave back more than 100 pips yesterday with stops being hit below the CHF 1.2580 level, representing the 50% retracement of the move from CHF 1.3235 to CHF 1.1920. Dollar offers are cited around the CHF 1.2685 level. The euro came off vis-? -vis the Swiss franc as the single currency tested bids around the CHF 1.5860 level while the British pound moved higher vis-? -vis the Swiss franc and tested offers around the CHF 2.3720 level.

AUD

The Australian dollar weakened vis-? -vis the U.S. dollar today as the Aussie tested bids around the US$ 0.7575 level and was capped around the $0.7600 figure. Australian dollar bids are cited around the $0.7520 level.

CAD

The Canadian dollar appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the C$ 1.1205 level and was capped around the C$ 1.1285 level. Technically, today??™s intraday high was just below the 61.8% retracement of the move from C$ 1.1455 to C$ 1.1030. Data released in Canada today saw September consumer prices rise 0.7% y/y, significantly off from August??™s 2.1% y/y climb. U.S. dollar offers are cited around the C$ 1.1355 level.

NZD

The New Zealand dollar came off vis-? -vis the U.S. dollar today as kiwi tested bids around the US$ 0.6670 level and was capped around the $0.6690 level. Technically, today??™s intraday high was right around the 50% retracement of the move from $0.5910 to $0.7465. New Zealand dollar offers are cited around the US$ 0.6870 level.

Gold/ Silver

Gold came off vis-? -vis the U.S. dollar today as the yellow metal tested bids around the US$ 596.25 level and was capped around the $602.65 level. The pair popped above the $600.00 figure in reaction to OPEC??™s larger-than-expected reduction in production. Silver weakened vis-? -vis the U.S. dollar as the pair tested bids around the US$ 11.93 level and was capped around the $ 12.13 level.

Crude Oil

Crude oil came off vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for December delivery tested bids around the US$ 59.88 level and was capped around the $61.31 level. Surprisingly, OPEC decided to reduce output by a larger-than-expected 1.2 million barrels and some OPEC members intimated additional output cuts may arise. This reduction was the largest cut since January 2002. Traders will closely monitor geopolitical hotspots this weekend including Iran, Iraq, and North Korea.