Daily Market Commentary

 €

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3980 level and was supported around the $1.4025 level.  Many data were released in the U.S. yesterday and they pointed to a deepening recession. First, weekly initial jobless claims reached a 26-year high, up 30,000 to 586,000.  Nearly two million U.S. workers have lost their jobs this year and pushed the unemployment rate higher to 6.7%.  Second, personal spending fell 0.6% in November while personal incomes fell 0.2%. These data underscore the fragile nature of final private demand and represented the fifth consecutive monthly decline in spending.  Third, durable goods orders were off 1% in November, less-than-expected.  Chancellor Merkel is likely to come under more fire for not adopting greater fiscal stimulus plans.  European Central Bank President Trichet on Tuesday called on governments to be mindful of the amount of debt they’re assuming to fund fiscal stimulus programs.  ECB member Nowotny yesterday indicated additional interest rate cuts by the ECB cannot be ruled out.  Liquidity is expected to remain light through next week.  Euro bids are cited around the US$ 1.3300 figure.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥90.85 level and was capped around the ¥90.25 level. Bank of Japan Policy Board member Kamekazi reported “When we think about further easing steps, we will be dealing with longer-term interest rates and corporate finance… Taking on credit risk is extremely abnormal...But we need abnormal steps at an abnormal time. The BOJ will do its best to ensure financial market stability by taking all possible policy steps.” Data released in Japan today saw November housing starts flat in November while November construction orders fell 12.5% y/y. Also, November corporate service prices were off 1.9% y/y.  Minutes from Bank of Japan November Policy Board meeting indicated policymakers believed “considerable time” would be required for economic conditions to improve.  The Japanese government yesterday formally approved a budget totaling ¥88.5 trillion, its largest ever and one that encompasses a ¥12 trillion fiscal stimulus.  A government report confirmed that big manufacturers’ sentiment printed at -44.5 in the October – December period, considerably worse than the -10.0 reading in the July – September period.  Prime Minister Aso reported “Japan cannot avoid the tsunami of the world recession, but it can try to find a way out.  The world economy is in a once-in-a-hundred-years recession. We need extraordinary measures to deal with an extraordinary situation."  The Nikkei 225 stock index climbed 0.97% to close at ¥8,599.50.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥126.00 figure and was capped around the ¥126.80 level.  The British pound came off vis-à-vis the yen as sterling tested bids around the ¥132.55 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥84.35 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at 6.8313 in the over-the-counter market, down from CNY 6.8397.

₤

The British pound moved lower vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4650 level and was capped around the US$ 1.4755 level.  BRC reported U.K. December retail sales “won’t be pretty.”  RICS yesterday reported house prices will fall an additional 10% in 2009.  Tuesday’s data suggested the U.K. economy shrank 0.6% in Q3 and many traders believe Bank of England’s Monetary Policy Committee will drive interest rates towards zero per cent in 2009.  Cable bids are cited around the US$ 1.4470 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9570 level and was supported around the ₤0.9480 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0790 level and was supported around the CHF 1.0730 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 1.2465 to CHF 0.9645.  Swiss National Bank yesterday published a grim report today that indicates Swiss companies expect business conditions to “considerably worsen” in 2009. U.S. dollar offers are cited around the CHF 1.1160 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.5120 level while the British pound moved lower vis-à-vis the Swiss franc and tested bids around the CHF 1.5800 figure.

Technical Outlook at 1330 GMT (EDT + 0500)

    (Bid Price)           (Today’s Intraday Range)

EUR/ USD      1.3998                1.4026, 1.3982
USD/ JPY         90.33                  90.87,   90.25
GBP/ USD      1.4648                1.4757, 1.4651
USD/ CHF      1.0750                1.0788, 1.0728
AUD/ USD     0.6831                0.6848, 0.6804
USD/CAD      1.2165                1.2201, 1.2135
NZD/USD      0.5743                0.5758, 0.5699
EUR/ JPY       126.35                127.24, 126.40
EUR/ GBP      0.9555                0.9570, 0.9482
GBP/ JPY       132.20                133.54, 132.25
CHF/ JPY         83.94                  84.38,   83.62


    

Support                      Resistance                  Support                   Resistance

EUR/ USD                                                          USD/ JPY

L1.       1.2130                         1.2925                            89.30                        100.75

L2.       1.1590                         1.3205                            84.20                        103.10

L3.       1.1210                         1.3595                            81.10                        106.00

   GBP/ USD                                                        USD/ CHF

L1.       1.5065                         1.6435                         1.1335                         1.1895

L2.       1.4580                         1.7150                         1.1080                         1.2425

L3.       1.4155                         1.7725                         1.0875                         1.3285

 AUD/ USD                                                       USD/ CAD

L1.       0.5535                         0.6380                         1.2375                         1.3460

L2.       0.5380                         0.6620                         1.2100                         1.3980

L3.       0.4775                         0.6980                         1.1655                         1.4505

 NZD/ USD                                                       EUR/ JPY

L1.       0.5120                         0.5875                         110.20                         119.90

L2.       0.4915                         0.6055                         108.05                         121.90

L3.       0.4650                         0.6340                         102.95                         129.15

  EUR/ GBP                                                       EUR/ CHF

L1.       0.7565                         0.8195                         1.3750                         1.4655

L2.       0.7365                         0.8400                         1.3210                         1.5060

L3.       0.7170                         0.8840                         1.2940                         1.5560

  GBP/ JPY                                                        CHF/ JPY

L1.       138.60                         156.95                           76.50                          84.80

L2.       124.20                         168.25                           69.75                          87.40

L3.       103.90                         177.35                           58.85                          91.70