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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