NEWS / Foreign Exchange

Forex and Commodity Market Commentary and Analysis (17 November 2006)

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The euro moved marginally lower vis-? -vis the U.S. dollar today as the single currency tested bids around the US$ 1.2760 level and was capped around the $1.2795 level. Today??™s range was thin as traders await clarity on the interest rate front from the Federal Reserve and European Central Bank. Euro bulls lifted the pair ahead of the $1.2755 level, the 38.2% retracement of the move from $1.2460 to $1.2940. Data released in the U.S. today saw October housing starts off 14.6% at an annualized 1.48 million units while September??™s tally was also downwardly revised. Also, building permits were off 6.3% to an annualized 1.53 million units, its lowest print since December 1997. Over the past year, housing starts are down 27.4%, the largest yearly decline since March 1991. Notably, the NAHB index of homebuilding activity improved to 33 in November, up from September??™s fifteen-year low of 30. Data released yesterday saw the Philadelphia Fed manufacturing survey notch slight growth this month after two months of contraction. In eurozone news, French officials have increased their verbal intervention regarding the euro with President Chirac arguing EMU-12 countries should be given more say in the ECB??™s monetary policy. This comes two days after French Prime Minister de Villepin railed against the euro??™s value. Data released in the eurozone today saw the September trade surplus print at ?‚¬2.0 billion from a revised deficit of -?‚¬5.4 billion in August. Euro bids are cited around the US$ 1.2700 figure.

??/ CNY

The yen came off marginally vis-? -vis the U.S. dollar today as the greenback tested offers around the ??118.45 level and was supported around the ??118.10 level. Technically, today??™s intraday high was right around the 76.4% retracement of the move from ??121.40 to ??109.00. Bank of Japan Governor Fukui did not offer a clearer assessment about when the central bank may lift interest rates yet some traders continue to believe BoJ will take its overnight rate up to 0.50% next month. Data released in Japan today saw October department store sales recede 1.9% y/y. Traders will closely monitor the G20 meeting of central bankers and finance minister in Melbourne this week to see if there is any pressure on Japan to let the yen appreciate. The Nikkei 225 stock index lost 0.45% to close at ??16,091.73. Dollar bids are cited around the ??117.85/ 35 levels. The euro came off vis-? -vis the yen as the single currency tested bids around the ??151.00 figure and was capped around the ??151.30 level. The British pound and Swiss franc weakened vis-? -vis the yen as the crosses tested bids around the ??222.80 and ??94.40 levels, respectively. The Chinese yuan came off marginally vis-? -vis the U.S. dollar as the greenback closed at CNY 7.8718 in the over-the-counter market, up from CNY 7.8715, and at CNY 7.8700 figure in the exchange-traded market. Data released in China today saw the October property climate index up 2.38% y/y to 103.4 and the Chinese media reiterated People??™s Bank of China has been adding yen to its foreign reserves. Also, it was reported the central bank has not ruled out lifting the reserve requirement again.

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The British pound gained ground vis-? -vis the U.S. dollar today as cable tested offers around the US$ 1.8890 level and was supported around the $1.8835 level. Technically, today??™s intraday low was just below the 50% retracement of the move from $1.8515 to $1.9175. Traders await the release of Q3 GDP data next Friday. Cable bids are cited around the US$ 1.8770 level. The euro moved lower vis-? -vis the British pound as the single currency tested bids around the ?‚¤0.6765 level and was capped around the ?‚¤0.6785 level.

CHF

The Swiss franc appreciated vis-? -vis the U.S. dollar today as the greenback tested bids around the CHF 1.2450 level and was capped around the CHF 1.2535 level. Technically, today??™s intraday low was right around the 23.6% retracement of the move from CHF 1.2790 to CHF 1.2345. Dollar offers are cited around the CHF 1.2555 level. The euro and British pound moved higher vis-? -vis the Swiss franc as the crosses tested offers around the CHF 1.6010 and CHF 2.3645 levels, respectively.

AUD

The Australian dollar gained marginal ground vis-? -vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7675 level and was supported around the $0.7645 level. Reserve Bank of Australia official Debelle reported the Aussie has been ???remarkably stable.??? Australian dollar bids are cited around the US$ 0.7615/ 0.7520 levels.

CAD

The Canadian dollar came off vis-? -vis the U.S. dollar today as the greenback tested offers around the C$ 1.1475 level and was supported around the C$ 1.1400 figure. U.S. dollar offers are cited around the C$ 1.1535 level.

NZD

The New Zealand dollar came off vis-? -vis the U.S. dollar today as the kiwi tested bids around the US$ 0.6615 level and was capped around the $0.6655 level. New Zealand dollar offers are cited around the US$ 0.6710 level.

Gold/ Silver

Gold appreciated vis-? -vis the U.S. dollar today as the yellow metal tested offers around the US$ 621.35 level and was supported around the $615.05 level. The U.S. dollar??™s pullback added to the pair??™s gains today. Weaker oil is limiting the pair??™s upside at the moment. Silver moved higher vis-? -vis the U.S. dollar as the pair tested offers around the US$ 12.88 level and was supported around the $12.61 level.

Crude Oil

Crude oil appreciated vis-? -vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested offers around the US$ 58.90 level and was supported around the $57.85 level. Warm weather in parts of the U.S. is keeping a lid on prices. Traders also await details about next month??™s OPEC meeting in Nigeria to evaluate this month??™s output reduction.