Forex Fundamental Outlook

Daily Market Commentary - Fundamental Outlook

€

The euro strengthened vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.4755 level and was supported around the $1.4640 level. Stops were reached above the $1.4740 level, representing the 23.6% retracement of the move from $1.4015 to $1.4965. Traders await today's U.S. NAHB housing market index followed by tomorrow's January housing starts, January consumer price inflation, and minutes from the FOMC's January meeting. There were little data released in both the U.S. and eurozone today thus traders took some cues from interest rate differentials that still favour the euro. European Central Bank member Noyer said he “remains confident” about France's economic situation despite global economic turbulence. EMU-13 economic data released today saw December construction output fall 0.6% m/m and 3.3% y/y. Many dealers expect the ECB will ease monetary policy later this year but with many policymakers remaining quite hawkish in their statements, timing remains a major uncertainty. Euro bids are cited around the US$ 1.4490 level.

¥/ CNY

The yen depreciated appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥107.20 level and was capped around the ¥108.30 level. Technically, today's intraday low was right around the 23.6% retracement of the move from ¥114.23 to ¥104.95. Data released in Japan overnight saw January department store sales off 2.1% y/y. The Japanese media is reporting the government will announce a plan this week to nominate Bank of Japan Deputy Governor Muto to replace outgoing Governor Fukui on 19 March. Most traders believe BoJ's Policy Board will keep the overnight call rate unchanged at 0.50% for the next few months. The Nikkei 225 stock index climbed 0.90% to close at ¥13,757.91. Dollar bids are cited around the ¥105.65/ 104.95 levels. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥158.95 level and was supported around the ¥157.95 level. The British pound weakened vis-à-vis the yen as sterling tested bids around the ¥208.75 level while the Swiss franc appreciated vis-à-vis the yen and tested offers around the ¥98.45 level. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 7.1580 in the over-the-counter market, down from CNY 7.1623 – the lowest close since the yuan revaluation of July 2005. Data released in China today saw January consumer price inflation up 7.1% y/y.

₤

The British pound weakened vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9455 level and was capped around the $1.9540 level. Stops were reached below the $1.9470 level, representing the 76.4% retracement of the move from $1.9385 to $1.9735. The pair came within 120 pips or so of establishing a fresh multi-month low. Sterling remains pressured by the U.K. government's plans to nationalize troubled lender Northern Rock Plc and by relatively dovish comments from Bank of England Monetary Policy Committee member Besley yesterday. Cable bids are cited around the US$ 1.9260 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7570 level and was supported around the ₤0.7505 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.0905 level and was capped around the CHF 1.1025 level. Technically, today's intraday high was right around the 23.6% retracement of the move from CHF 1.0725 to CHF 1.1105. Swiss National Bank reported it expects Swiss GDP growth to decelerate in 2009 to about 2.0%. U.S. dollar offers are cited around the CHF 1.1155 level. The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6085 and CHF 2.1245 level.

A$/ NZ$

The Australian dollar rocketed higher vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.9235 level and was supported around the $0.9135 level. The pair reached its highest level since 9 November 2007. Minutes from Reserve Bank of Australia's most recent policy meeting were released in which policymakers voted to lift the cash rate target by 25bps to 7.00%. In fact, policymakers discussed a potential 50bps tightening and this led to increased speculation the central bank will continue to raise rates. Australian dollar bids are cited around the US$ 0.9165 level. The New Zealand dollar moved higher vis-à-vis the U.S. dollar today as the Aussie tested offers around the US$ 0.8020 level and was supported around the $0.7950 level. New Zealand dollar bids are cited around the US$ 0.7895 level.

C$

The Canadian dollar weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the C$ 1.0115 level and was supported around the C$ 1.0020 level. Technically, today's intraday high was just below the 50% retracement of the move from C$ 1.0380 to C$ 0.9870. Data released in Canada today saw January headline consumer price inflation rise an annual 2.2%, down from December's 2.4% print and the weakest growth since August 2007. Core CPI was up 1.4% y/y in January, down from 1.5% in December and the weakest increase since July 2005. U.S. dollar offers are cited around the C$ 1.0185 level.

GCI Financial

Posted in: Forex