DAILY MARKET COMMENTARY
19 November 2009
Thursday
Fundamental Outlook at 1500 GMT (EDT + 0500)
€
The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4840 level and was capped around the $1.4965 level. Weakness in global equity markets, particularly in U.S. shares, resulted in less demand for higher-yielding assets denominated in euro and other currencies. Traders reduced their long exposure to risk today and many dealers believe this is a trade that could continue through the end of the year as positions are unwound. Data released in the U.S. today saw weekly initial jobless claims print at 505,000, unchanged from the revised 505,000 previous print, while continuing jobless claims fell to 5.611 million from 5.650 million. Other data released today saw October leading indicators print at a lower-than-expected +0.3%, down from the prior reading of +1.0%, while the November Philadelphia Fed index rallied to 16.7 from 11.5. Dallas Fed President Fisher reported "the sooner we are able to return to traditional policymaking the better." In eurozone news, French President Sarkozy is reviewing a proposed plan to increase fiscal spending by €35 billion to support the economy. German Economic minister Bruederle warned the credit crisis may spread if banks do not increase their lending. Germany's Bundesbank reported the global economy should continue its economic recovery "in the current quarter and the following months" but said emerging market economies are faring better than developed economies. Euro bids are cited around the US$ 1.4445 level.
¥/ CNY
The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.63 level and was capped around the ¥89.45 level. Bank of Japan's Policy Board will conclude its two-day meeting overnight and is expected to keep its overnight call rate target unchanged at 0.10%. Many traders believe the Policy Board may acknowledge rates will remain low for some time, a policy the government is trying to keep intact, especially in the current deflationary environment. Some dealers are buying yen on the premise the Chinese yuan will be revalued and allowed to appreciate. Data released in Japan overnight saw the September all-industry activity index decline 0.6% m/m, a reversal from August's +0.9% gain. BoJ Policy Board member Mizuno's term expires on 2 December and Kobe University Professor Kobe has been nominated to replace him, a move that would likely have little impact on monetary policy. Former BoJ Governor Fukui verbally intervened today, indicating the U.S. dollar's role is "very important" and "will be vital" for the time being, adding problems with the U.S. economy have rendered it a "tough challenge of securing" confidence in the U.S. dollar. BoJ's Policy Board recently predicted core consumer prices will decline 1.5% in the year ending March 2010, decline 0.8% in the fiscal year ending March 2011, and decline 0.4% in the fiscal year ending March 2012. The central bank recently reported it will stop its purchase of corporate debt and commercial paper at the end of 2009. BoJ Policy Board's next interest rate decision is scheduled for 19 November. The Nikkei 225 stock index lost 1.52% to close at ¥9,529.46. U.S. dollar offers are cited around the ¥94.75 level. The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥131.75 level and was capped around the ¥133.75 level. The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥147.30 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥87.10 level. In Chinese news, the U.S. dollar strengthened vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8295 in the over-the-counter market, up from CNY 6.8241. Traders are curious as to what will develop with Chinese monetary policy and currency policy following President Obama's trip to China this week. People's Bank of China member Fan Gang yesterday reported Chinese gross domestic product growth will probably be between 8% and 9% in 2010 and does not see a big inflation risk now. Treasury Secretary Geithner noted "We need to see a broad move to more flexible exchange rates across our major trading partners. China has committee...they understand they need to do it, I think they want to do it."
₤
The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6605 level and was capped around the $1.6750 level. Sterling moved lower today as traders reduced their exposure to higher-yielding assets. Data released in the U.K. today saw CML October gross mortgage lending increase to ₤13.5 billion from ₤12.9 billion while October net retail sales increased 0.4% m/m and 3.4% y/y. Also, October public sector net borrowing fell to ₤11.4 billion from ₤14.9 billion. Bank of England Monetary Policy Committee member Fisher warned the central bank "may well not" be able to reduce its bloated balance sheet to pre-crisis levels. Cable bids are cited around the US$ 1.6430 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.8965 level and was supported around the ₤0.8900 figure.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4901 1.4965, 1.4842
USD/ JPY 88.95 89.43, 88.63
GBP/ USD 1.6655 1.6748, 1.6605
USD/ CHF 1.0149 1.0194, 1.0094
AUD/USD 0.9182 0.9301, 0.9131
USD/CAD 1.0632 1.0689, 1.0544
NZD/USD 0.7303 0.7463, 0.7271
EUR/ JPY 132.54 133.76, 131.75
EUR/ GBP 0.8946 0.8954, 0.8900
GBP/ JPY 148.12 149.67, 147.31
CHF/ JPY 87.58 88.51, 87.08
Support Resistance Support Resistance
EUR/ USD USD/ JPY
L1. 1.4470 1.4915 88.60 93.30
L2. 1.4355 1.5140 87.10 95.50
L3. 1.4175 1.5360 86.10 98.85
GBP/ USD USD/ CHF
L1. 1.6115 1.6685 1.0275 1.0580
L2. 1.5720 1.6830 1.0040 1.0695
L3. 1.5405 1.7040 0.9750 1.0885
AUD/ USD USD/ CAD
L1. 0.8450 0.8830 1.0535 1.0945
L2. 0.8300 0.9050 1.0365 1.1125
L3. 0.8070 0.9120 1.0155 1.1355
NZD/ USD EUR/ JPY
L1. 0.6880 0.7125 131.45 135.75
L2. 0.6750 0.7260 129.75 136.90
L3. 0.6535 0.7395 127.00 138.75
EUR/ GBP EUR/ CHF
L1. 0.8795 0.8995 1.5110 1.5380
L2. 0.8675 0.9105 1.4905 1.5580
L3. 0.8320 0.9225 1.4670 1.5880
GBP/ JPY CHF/ JPY
L1. 146.10 152.50 86.30 88.65
L2. 142.05 157.75 85.40 90.10
L3. 135.70 161.70 81.55 91.60
SCHEDULE
Thursday, 19 November 2009
all times GMT
(last release in parentheses)
0030 Australia August average weekly wages (1.2% q/q)
0030 Australia August average weekly wages (6.1% y/y)
0100 Australia Reserve Bank of Australia official Debelle speaks
0430 Japan September all-industry activity index (0.90% m/m)
0500 Japan September coincident index
0500 Japan September leading index
0545 US Philadelphia Fed President Plosser speaks
0715 CH October trade balance (CHF 1.91 billion)
0900 Italy September trade balance
0930 UK October public sector net cash requirement (₤19.4 billion)
0930 UK October M4 money supply (11.6% y/y)
0930 UK October retail sales (0.0% m/m)
0930 UK October retail sales (2.4% y/y)
0930 UK October mortgage approvals (56,000)
0930 UK October public sector net borrowing (₤14.8 billion)
1330 US Weekly initial jobless claims
1330 US Continuing jobless claims (5.631 million)
1330 Canada September wholesale sales (-1.4% m/m)
1330 Canada September leading indicators (1.1% m/m)
1330 Canada September international securities transactions
1500 US November Philadelphia Fed index (11.5)
1500 US October leading indicators (1.0%)
2145 US Dallas Fed President Fisher speaks
Friday, 20 November 2009
all times GMT
(last release in parentheses)
N/A Japan October Tokyo-area department store sales (-10.5% y/y)
N/A Japan October department store sales (-7.8% y/y)
N/A Japan Bank of Japan Policy Board interest rate decision
0200 NZ October credit card spending
0700 Japan October convenience store sales (-5.6% y/y)
0700 Germany October producer prices (-0.5% m/m)
0700 Germany October producer prices (-7.6% y/y)
0900 Italy September industrial sales
0900 Italy September industrial orders
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