Sunday, January 24, 2010

Foreign Exchange Research - Daily Market Commentary



 

DAILY MARKET COMMENTARY
20 January 2010

Wednesday

 


 

Fundamental Outlook at 1500 GMT (EDT + 0500)

 

 

The euro depreciated sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4080 level and was capped around the $1.4295 level.  Dealers are talking about the victory in the U.S. state of Massachusetts by a Republican in a special Senate election and the impact this will have on the Obama administration's ability to pass legislation.  Banks and financial institutions are trying to repair their balance sheets and the removal of Obama's filibuster-free legislative ability could be positive for the U.S. dollar.  The common currency was also weighed down today by ongoing concerns regarding Greece's fiscal position.  Greek finance minister Papaconstantinou today said the country is "reviewing all options" as to how to raise funds to improve its fiscal position.  Dealers cite concerns that the credit crisis could spread to other eurozone countries and engender a greater panic in capital markets there, possibly requiring intervention from the European Central Bank.  European Central Bank member Stark reported said the ECB wil "not change its rules" for Greece and that Greece's situation requires a "radical turnaround."  German Chancellor Merkel called on Germany to remain a net exporter.  In U.S. news, data released in the U.S. saw MBA mortgage applications decline to +9.1% from +14.3% in the latest reporting week.  Also, December headline producer prices were up 0.2% m/m and 4.4% y/y while the core ex-food and energy components were up 0.0% m/m and 0.9% y/y.  Also, December housing starts fell to an annualized 557,000 from a revised 580,000 in November and building permits were up 10.9% y/y to print at 653,000, up from a revised 589,000.  Euro bids are cited around the US$ 1.3885 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥91.45 level and was supported around the ¥90.80 level.  Data released in Japan overnight saw revised December machine tool orders up 27.2% m/m and +63.4% y/y.  As expected, Bank of Japan kept its assessment of the economy unchanged overnight and did not include exchange rates and stock price volatility as risk in its assessment.  Notably, the central bank also improved its assessment of the domestic housing market and upgraded its view on financial market conditions for the first time in four months.  BoJ said the economy is "picking up" but remains in a "difficult condition." BoJ Governor Shirakawa reported demand for funds from small companies remains weak.  Data released in Japan yesterday saw December consumer confidence print at 37.6.  Former Bank of Japan Policy Board member Hirano reported a weak yen is positive for Japan's economy.  Prime Minister Hatoyama, whose government is embroiled in a funds scandal, said the government and BoJ must cooperate in combating deflation.  This scandal has been brewing for several months but some traders believe the problems are worsening and could prevent the government from enacting needed reforms and budget agreements.  There is increasing speculation the central bank will extend its near-zero per cent interest rate policy and possibly ramp up fund injections into the economy.  Group of Seven finance ministers are expected to discuss exchange rates in Canada when they convene on 5-6 February.  The Nikkei 225 stock index lost 0.25% to close at ¥10,737.52.  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 ¥128.40 level and was capped around the ¥130.30 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥147.55 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥86.95 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8270 in the over-the-counter market, down from CNY 6.8277.  People's Bank of China today instructed some banks to restrict lending and will restrict overall credit growth in China to CNY 7.5 trillion in 2010.  People's Bank of China guided its benchmark one-year bill yield to its highest level in fourteen months to moderate record loan growth and slow asset bubbles.  PBoC sold bills at a rate of 1.9264% in open-market operations and this is the central bank's latest signal that it is intent on tightening monetary policy this year.  Many economists foresee a GDP growth rate above 10% this year.

Technical Outlook at 1330 GMT (EDT + 0500)

 

             (Bid Price)       (Today's Intraday Range)                                

           

EUR/ USD        1.4192                1.4294, 1.4113
USD/ JPY           91.19                  91.45,   90.78
GBP/ USD        1.6293                 1.6370, 1.6242
USD/ CHF         1.0440                 1.0458, 1.0317
AUD/USD         0.9118                0.9242, 0.9111
USD/CAD         1.0465                 1.0487,
1.0301
NZD/USD         0.7213                0.7354, 0.7198
EUR/ JPY         128.80                 130.31, 128.38
EUR/ GBP        0.8667                 0.8732, 0.8657
GBP/ JPY         148.58                149.23, 147.54
CHF/ JPY           87.29                  88.31,   86.96

                                      

 

Support                        Resistance                   Support                     Resistance

 

EUR/ USD                                                              USD/ JPY

 

L1.        1.4355                          1.4925                             86.95               93.20 

L2.        1.4175                          1.5145                             84.85               95.50
L3.        1.3795                          1.5360                             82.30               98.85

 

   GBP/ USD                                                          USD/ CHF

 

L1.        1.5755                          1.6890                          1.0040                          1.0370

L2.        1.5355                          1.7310                          0.9920                          1.0580

L3.        1.4950                          1.7615                          0.9750                          1.0695

 

 AUD/ USD                                                           USD/ CAD

 

L1.        0.8870                          0.9425                          1.0150                          1.0590

L2.        0.8685                          0.9600                          0.9920                          1.0820

L3.        0.8225                          0.9840                          0.9735                          1.1060

 

 

 NZD/ USD                                                           EUR/ JPY

 

L1.        0.7145                          0.7645                          125.70                          135.75

L2.        0.6880                          0.7785                          122.50                          138.20

L3.        0.6750                          0.8215                          118.55                          141.00

 

 

  EUR/ GBP                                                          EUR/ CHF

 

L1.        0.8795                          0.9175                          1.4575                          1.4875

L2.        0.8675                          0.9290                          1.4305                          1.5010

L3.        0.8320                          0.9430                          1.4110                          1.5450

 

  GBP/ JPY                                                           CHF/ JPY

 

L1.        144.90                          149.20                            85.30                           91.60

L2.        141.20                          150.60                            83.35                           93.60

L3.        135.95                          152.20                            81.40                           97.95

 

 

 

SCHEDULE

 

 

Wednesday, 20 January 2010

all times GMT

(last release in parentheses)

 

0600     Japan               December machine tool orders

0700     Japan               December convenience store sales (-6.3% y/y)

0700     Germany           December producer prices (0.10% m/m)

0700     Germany           December producer prices (-5.9% y/y)

0900     Italy                  November industrial orders (0.3% m/m)

0900     Italy                  November industrial sales

0930     UK                    Bank of England MPC meeting minutes

0930     UK                    December jobless claims change (-6,300)

0930     UK                    December claimant count rate (5.0%)

0930     UK                    November ILO unemployment rate (7.9%)

0930     UK                    November average earnings, ex-bonus (1.7%)

1005     Italy                  November current account

1200     Canada             December consumer price index (0.5% m/m)

1200     Canada             December consumer price index (1.0% y/y)

1200     Canada             Bank of Canada CPI, core (0.40% m/m)

1200     Canada             Bank of Canada CPI, core (1.50% y/y)

1330     US                    December producer price index (1.8% m/m)

1330     US                    December producer price index (2.4% y/y)

1330     US                    December PPI, ex-food and energy (0.5% m/m)

1330     US                    December PPI, ex-food and energy (1.2% y/y)

1330     US                    December housing starts (574,000)

1330     US                    December building permits (584,000)

1330     Canada             November manufacturing sales (2.0% m/m)

2145     NZ                    November retail sales (0.0% m/m)

2145     NZ                    November retail sales, ex-autos (0.5% m/m)

 

Thursday, 21 January 2010

all times GMT

(last release in parentheses)

 

N/A       Germany           January PMI, manufacturing (52.7)

N/A       Eurozone          January PMI, services (53.6)

N/A       Eurozone          January PMI, manufacturing (51.6)

N/A       Eurozone          January PMI, composite (54.2)

0500     Japan               November leading index

0500     Japan               November coincident index

0800     CH                    December M3 money supply (7.6% y/y)

0900     Eurozone          European Central Bank monthly report

0930     UK                    December public sector net cash requirement (₤14.7 billion)

0930     UK                    December public sector net borrowing (₤20.3 billion)

0930     UK                    Bank of England major banks' mortgage approvals (63,000)

0930     UK                    December M4 money supply

1000     CH                    January ZEW survey, expectations (54.0)

1100     UK                    January CBI quarterly industrial trends

1330     US                    Weekly initial jobless claims

1330     US                    Continuing jobless claims

1330     Canada             November wholesale sales (0.3% m/m)

1500     US                    December leading indicators (0.9%)

1500     US                    January Philadelphia Fed index (20.4)

1530     Canada             Bank of Canada senior loan office survey

1530     Canada             Q4 business outlook, future sales

 

Friday, 22 January 2010

all times GMT

(last release in parentheses)

 

0030     Australia           Q4 export price index (-9.6% q/q)

0030     Australia           Q4 import price index (-3.0% q/q)

0430     Japan               November all-industry activity index (1.2% m/m)

0745     France              January business confidence indicator (89.0)

0745     France              January production outlook

0800     France              January PMI, services (59.3)

0800     France              January PMI, manufacturing (54.4)

0930     UK                    December retail sales (-0.3% m/m)

0930     UK                    December retail sales (3.1% y/y)

1000     Eurozone          November industrial new orders

1330     Canada             November retail sales (0.8% m/m)

1330     Canada             November retail sales, ex-autos (0.2% m/m)

 



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