DAILY MARKET COMMENTARY
30 December 2009
Wednesday
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$ 1.4270 level and was capped around the $1.4360 level. The common currency fell to three-month lows on U.S. economic recovery signs and an improved economic outlook from the Fed. Some dealers believe the Fed is inching closer to removing more of its monetary stimulus measures. Data releaseed in the U.S. today saw the December ISM Chicago headline business barometer imporve to 60.0 from 56.1 in November, approaching a four-year high. Recently, the U.S. dollar has started to benefit from improving U.S. economic fundamentals, a reversal from earlier in the year when the greenback failed to markedly improve from better fundamentals. In eurozone news, EMU-16 bank lending declined 0.7% m/m last month, the third consecutive month of declines. Also, the EMU-16 leading economic index rose 0.7% to 107.1 last month following October's 0.6% gain and September's 0.9% gain. Also, the EMU-16 M3 money supply fell by 0.2% y/y, far below the forecast. The euro's share of global foreign reserves has risen to all-time highs according to the International Monetary Fund. The euro's share of global foreign reserves is now at 27.7% whereas the U.S. dollar's weighting has falledn to 61.6%. ECB member Mersch this week reported the eurozone economic recovery looks "moderate and precarious." In contrast, ECB member Kranjec reported there are signs the global economic crisis is over. Euro bids are cited around the US$ 1.3885 level.
¥/ CNY
The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥92.75 level and was supported around the ¥91.90 level. In the absence of major news, traders continue to square their books at year-end and react positively to dollar-supportive U.S. economic data. Ongoing doubts concerning Japan Airlines and the company's possible bankruptcy are having a negative impact on the yen. Standard & Poors warned Japan's "AA" credit rating could be lowered if Japan fails to stabilize its debt levels. The Japanese government released a long-term strategy overnight that aims to achieve GDP growth of an average 2% over the next decade. Data released in Japan overnight saw December PMI improve to 53.8. Minutes from Bank of Japan's latest Policy Board meeting were released last week in which the government asked the central bank to monitor deflation. The minutes revealed "many" Policy Board members agreed "the bank would maintain its stance of responding promptly to changes in the market situation." Policymakers said the central bank "would adopt the most effective method for money-market operations that conformed to changes in financial markets." After an emergency meeting on 1 December, the central bank introduced a ¥10 trillion fixed-rate lending facility that was designed to arrest the yen's advances and counter deflation. The central bank also characterized the most recent bout of deflation as "mild." The Nikkei 225 stock index lost 0.86% to close at ¥10,546.44. U.S. dollar offers are cited around the ¥94.75 level. The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥132.75 level and was supported around the ¥131.80 level. The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥148.95 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥89.35 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8255 in the over-the-counter market, down from CNY 6.8292. Prime Minister Wen reported China's export markets are facing "big pressures" and added the outlook for shipments next year "isn't optimistic." Wen also said policymakers must "manage" people's expectations regarding price increases. People's Bank of China adviser yesterday Fan Gang said the yuan should not depreciate in the long-term but cited a risk the yuan may depreciate in the short term. Fan added China's GDP growth rate may be between 8% and 9% in 2010 and said export growth could reach double digits in 2010.
₤
The British pound depreciated sharply vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.5830 level and was capped around the $1.6095 level. Traders continued to book profits at the end of the year, capturing some of the significant gains sterling made in 2009 after retracing many of its losses from H2 2008. Prime Minister Brown talked up the U.K.'s economic growth prospects today but acknowledged the economic recovery remains "fragile." Brown must call a general election by early June. Large spending cuts will likely be required to improve the U.K.'s fiscal position. Most traders believe Bank of England's Monetary Policy Committee remains in a wait-and-see mode and will expand its quantitative easing programs if required. Monetary policy is expected to remain unchanged until February, however, when Q4 GDP and the latest quarterly inflation report are due. Cable bids are cited around the US$ 1.5755 level. The euro moved lower vis-à-vis the British pound as cable tested bids around the ₤0.8910 level and was supported around the ₤0.9055 level.
CHF
The Swiss franc came off vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0420 level and was supported around the CHF 1.0350 level. Data released in Switzerland today saw the December KOF leading indicator improve to 1.68 from 1.62 in November. KOF, however, also reported the Swiss economy will "significantly lose momentum" in the coming months. Data released in Switzerland this week saw the UBS November consumption indicator rise to 1.28 from 0.88 in October. This represents the third consecutive monthly increase, evidencing an increase in consumer spending. U.S. dollar offers are cited around the CHF 1.0615 level. The euro moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4855 level while the British pound appreciated vis-à-vis the Swiss franc and tested offers around the CHF 1.6700 figure.
Technical Outlook at 1330 GMT (EDT + 0500)
(Bid Price) (Today's Intraday Range)
EUR/ USD 1.4354 1.4360, 1.4272
USD/ JPY 92.48 92.75, 91.89
GBP/ USD 1.6076 1.6094, 1.5831
USD/ CHF 1.0359 1.0421, 1.0350
AUD/USD 0.8948 0.8958, 0.8901
USD/CAD 1.0542 1.0576, 1.0424
NZD/USD 0.7217 0.7226, 0.7142
EUR/ JPY 132.63 132.77, 131.78
EUR/ GBP 0.8921 0.9053, 0.8910
GBP/ JPY 148.58 148.93, 146.05
CHF/ JPY 89.23 89.34, 88.54
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
Wednesday, 30 December 2009
all times GMT
(last release in parentheses)
0200 NZ November M3 money supply (0.8% y/y)
0900 Eurozone November M3 money supply (1.6%)
0900 Eurozone November M3 money supply (0.3% y/y)
0900 Italy October large company employment
1000 Italy November producer price index (0.0% m/m)
1000 Italy November producer price index (-6.1% y/y)
1030 CH December KOF leading indicator (1.62)
1445 US December Chicago PMI (56.1)
Thursday, 31 December 2009
all times GMT
(last release in parentheses)
N/A UK December Nationwide house prices (0.5% m/m)
N/A UK December Nationwide house prices (2.7% y/y)
0030 Australia November private sector credit (0.0% m/m)
0030 Australia November private sector credit (1.1% y/y)
1330 US Weekly initial jobless claims (452,000)
1330 US Continuing jobless claims (5.076 million)
Friday, 1 January 2010
all times GMT
(last release in parentheses)
N/A
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