Daily Market Commentary

Fundamental Outlook at 1500 GMT (EDT + 0500)

€

The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.3735 level and was supported around the $1.3590 level.  Dealers slowly moved back into the common currency as they grew more optimistic that Greece would receive financial assistance from some of its eurozone partners, with Germany the most likely solution and France a possibility.  Spreads on Greek credit default swaps tightened between five and ten basis points today, suggesting dealers are becoming less concerned with a Greek default.  Greek Prime Minister Papandreou will meet German Chancellor Merkel this week to discuss Greece’s progress in reducing its massive fiscal deficit.  Greece this week announced it is planning to reduce its budget deficit by another €6.5 billion and there remains talk that Greece will bring a new ten-year bond issue to refinance some maturing debt with a deal size around €5 billion.  Data released in the eurozone today saw EMU-16 retail sales decline 0.3% m/m and 1.3% y/y. Also, EMU-16 services PMI decreased to 51.8 from 52.5 with Germany’s services PMI reading falling to 51.9 from 52.2.  Other German data saw January retail sales flat m/m and off 3.4% y/y.  In U.S. news, data released today saw MBA mortgage applications reverse higher and print at +14.6%, up from the prior reading of -8.5, while February Challenger job cuts were off 77.4% y/y, worse than the prior reading of -70.4% y/y.  Also, the February ADP employment change was in-line with expectations at -20,000, an improvement from the revised -60,000 print.  Additionally, the February non-manufacturing ISM composite came in at 53.0, up from the prior reading of 50.5.  Data to be released tomorrow including Q4 non-farm productivity, Q4 unit labour costs, weekly initial jobless claims, continuing claims, January factory orders, and January pending home sales.  All-important February non-farm payrolls data will be released on Friday and many forecasts are focusing on a net loss of about 65,000 jobs, compared with last month’s -20,000 level.  The unemployment rate is expected to print around 9.8% or so and average hourly earnings are expected to come in around 2.0% y/y.  Euro bids are cited around the US$ 1.3335 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥88.30 level and was capped around the ¥89.00 figure. Bank of Japan Governor Shirakawa continued the verbal rhetoric today, saying investors are “scrutinizing” global budget deficits.  Shirakawa noted “Risk premium on Japanese government bonds hasn’t risen so far because investors trust the policy implementation of the government and the Bank of Japan. The central bank will continue to try to earn that trust through our monetary policy to keep bond yields stable.”  Finance minister Kan is considering a proposal to raise Japan’s sales tax for the first time since 1997.  Earlier this week, financial services minister Kamei called on the BoJ to directly purchase JGBs to financial stimulus spending.  Also, Kan earlier this week indicated he hopes deflation will end by the end of the year whereas current BoJ forecasts have deflation continuing through at least the second half of 2011.  Data released in Japan this week saw the January unemployment rate decline to 4.9%.  The Nikkei 225 stock index climbed 0.30% to close at ¥10,253.14.  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 ¥121.70 level and was supported around the ¥120.60 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥134.00 figure while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥83.15 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8250 in the over-the-counter market, down from CNY 6.8266.  People’s Bank of China Deputy Governor Su reported China’s economy will expand more in 2010 than last year’s 8.7% growth rate.  Data released in China this week saw February manufacturing PMI decline go 52.0 from 55.8, considerably weaker-than-expected.

Technical Outlook at 1330 GMT (EDT + 0500)
 
                 (Bid Price)        (Today’s Intraday Range)    
   
EUR/ USD     1.3693                1.3735, 1.3592
USD/ JPY      88.47                  88.99,  88.31
GBP/ USD     1.5094                1.5130, 1.4957
USD/ CHF     1.0679                1.0762, 1.0647
AUD/USD      0.9051                0.9084, 0.9006
USD/CAD      1.0316                1.0364, 1.0272
NZD/USD      0.6938                0.6984, 0.6891
EUR/ JPY      121.15                121.72, 120.59
EUR/ GBP     0.9070                0.9098, 0.9048
GBP/ JPY      133.54                134.00, 132.71
CHF/ JPY      82.81                  83.17,  82.49

Support                      Resistance                         Support                     Resistance

  

L1.       1.3480                         1.3965                            86.95                          93.20

L2.       1.3245                         1.4200                            84.85                          95.50
L3.       1.3085                         1.4495                            82.30                          98.85

 

   GBP/ USD                                                        USD/ CHF

 

L1.       1.5345                         1.5880                         1.0540                         1.0830

L2.       1.5160                         1.6215                         1.0350                         1.1045

L3.       1.4950                         1.6530                         1.0040                         1.1315

 

 AUD/ USD                                                       USD/ CAD

 

L1.       0.8555                         0.8860                         1.0560                         1.0960

L2.       0.8225                         0.9005                         1.0400                         1.1140

L3.       0.8105                         0.9325                         1.0150                         1.1360

 

 

 NZD/ USD                                                       EUR/ JPY

 

L1.       0.6535                         0.6985                         118.50                         124.85

L2.       0.6265                         0.7295                         115.65                         128.90

L3.       0.6160                         0.7430                         112.05                         132.85

 

 

  EUR/ GBP                                                       EUR/ CHF

 

L1.       0.8500                         0.9175                         1.4575                         1.4875

L2.       0.8320                         0.9290                         1.4305                         1.5010

L3.       0.8190                         0.9430                         1.4110                         1.5450

 

  GBP/ JPY                                                        CHF/ JPY

 

L1.       135.85                         141.75                           81.40                          85.25

L2.       131.10                         146.35                           78.95                          87.65

L3.       129.35                         152.90                           75.05                          91.60