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

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The euro appreciated marginally vis-?�-vis the U.S. dollar today as the single currency tested offers around the US$ 1.2850 level and was supported around the $1.2815 level. Technically, today??�s intraday high was just below the $1.2855 level, representing the 76.4% retracement of the move from $1.2980 to $1.2460. Traders were loath to put on new positions ahead of a series of expected appearances from European Central Bank President Trichet over the next couple of days in Australia. Today, Trichet noted the Group of Ten ???is in the same mood as before??? regarding inflation, suggesting policymakers are still concerned that oil prices are precipitating inflation. He also added there are several reasons to not be complacent about inflation. Bundesbank??�s November monthly report reiterated that interest rates are still very low and that inflation risks persist and emphasized ???second-round effects??? on wages in the eurozone. The ECB next convenes on 7 December and most traders believe policymakers will up borrowing costs by 25bps at that time. German data released today saw the October producer price index rise 0.3% m/m and 4.6% y/y. In U.S. news, last week??�s U.S. housing market data evidenced an appreciable contraction in housing market activity yet the U.S. dollar maintained a bid tone. The dollar may have been bid last week on account of the unwinding of short U.S. dollar positions by traders who did not anticipate the price of oil would fall below the psychologically-important US$ 60.00 figure. The U.S. Thanksgiving holiday on the U.S. will reduce liquidity at the end of the week. Euro bids are cited around the US$ 1.2780/ 55 levels.

??/ CNY

The yen depreciated vis-?�-vis the U.S. dollar today as the greenback tested offers around the ??118.15 level and was supported around the ??117.75 level. Technically, today??�s intraday low was right around the 38.2% retracement of the move from ??119.85 to ??116.55. Rumours that the Japanese government is about to reduce its GDP forecast for the first time in 23 months kept the yen pressured during the Australasian session. Bank of Japan Governor Fukui spoke in Melbourne today saying ???If such tendency in the domestic economy, gradual and steady growth on stabilized prices, would be maintained with no obstacles, the BoJ will gradually adjust interest rates while cautiously keeping eyes on various risks in the future.??? Some traders continue to speculate the central bank will tighten rates before the end of 2006 while others see a move before the end of the Japanese fiscal year in March 2007. Data released in Japan today saw October convenience store sales fall 0.7% y/y, the fourth consecutive monthly decline. The Nikkei 225 stock index shed 2.27% to close at ??15,725.94. The euro moved higher vis-?�-vis the yen as the single currency tested offers around the ??151.65 level and was supported around the ??151.05 level. The British pound and Swiss franc appreciated vis-?�-vis the yen as the crosses tested offers around the ??224.00 and ??95.15 levels, respectively. The Chinese yuan depreciated vis-?�-vis the U.S. dollar as the greenback closed at CNY 7.8740 in the over-the-counter market, up from CNY 7.8718, and at CNY 7.8750 in the exchange-traded market.

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The British pound gained marginal ground vis-?�-vis the U.S. dollar today as cable tested offers around the US$ 1.8985 level and was supported around the $1.8930 level. Stops were reached above the $1.8965 level, representing the 38.2% retracement of the move from $1.9175 to $1.8835. Data released in the U.K. today saw Rightmove November property asking prices escalate at their fastest pace in more than two years. Also, CML reported October gross lending reached a new monthly record in October at ?��30.3 billion while BBA noted lending was up ?��5.5 billion last month. BSA, however, reported October mortgage approvals were down 9% m/m. The M4 money supply gained 0.9% m/m and 14.0% y/y while public sector net borrowing improved to -?��1.6 billion last month. Cable bids are cited around the US$ 1.8925/ 1.8890 levels. The euro moved higher vis-?�-vis the British pound as the single currency tested offers around the ?��0.6780 level and was supported around the ?��0.6765 level.

CHF

The Swiss franc appreciated vis-?�-vis the U.S. dollar today as the greenback tested bids around the CHF 1.2395 level and was capped around the CHF 1.2445 level. Technically, today??�s intraday high was around the 23.6% retracement of the move from CHF 1.2770 to CHF 1.2345. October trade balance data will be released tomorrow. Dollar offers are cited around the CHF 1.2505 level. The euro and British pound moved lower vis-?�-vis the Swiss franc as the crosses tested bids around the CHF 1.5920 and CHF 2.3510 levels, respectively.

AUD

The Australian dollar gained ground vis-?�-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.7700 figure and was supported around the ?��0.7680 level. Technically, today??�s intraday high was right around the 23.6% retracement of the move from $0.6770 to $0.7985. Australian dollar offers are cited around the $0.7755 level.

CAD

The Canadian dollar appreciated vis-?�-vis the U.S. dollar today as the greenback tested offers around the C$ 1.1465 level and was supported around the $1.1420 level. Technically, the pair is hovering right around the 61.8% retracement of the move from C$ 1.1770 to $1.0925. U.S. dollar offers are cited around the C$ 1.1570 level.

NZD

The New Zealand dollar appreciated vis-?�-vis the U.S. dollar today as the kiwi tested offers around the US$ 0.6680 level and was supported around the $0.6645 level. New Zealand dollar offers are cited around the US$0.6710/ 0.6870 levels.

Gold/ Silver

Gold appreciated vis-?�-vis the U.S. dollar today as the yellow metal tested offers around the US$ 625.40 level and was supported around the $621.20 level. The dollar??�s pullback early in the North American session contributed to the pair??�s gains. Silver moved higher vis-?�-vis the U.S. dollar as the pair tested offers around the US$ 12.94 level and was supported around the $12.78 level.

Crude Oil

Crude oil extended recent losses vis-?�-vis the U.S. dollar today as light, sweet NYMEX crude oil futures for January delivery tested bids around the US$ 58.28 level and was capped around the $58.83 level. Traders continue to send oil lower as shipping data confirm that OPEC members have not yet attained their pledged reduction of 1.2 million barrels per day. Dealers are skeptical that an OPEC meeting in Nigeria on 14 December will result in additional supply cuts. Temperatures are expected to be above normal in the eastern U.S. over the next week and this is also limiting oil prices.