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$ 1.3630 level and was supported around the $1.3530 level.  The common currency continued to scale back recent losses as dealers reacted to greater optimism concerning the likelihood that Greece’s financial problems can be managed without precipitating a national default.  German Chancellor Merkel met with Greek Prime Minister Papandreou today and there was little indication that Germany is preparing to provide financial assistance to Greece.  Papandreou reported Greece has not asked for financial aid and European Union official Junckers said he hopes the markets will quiet down once more details about Greece’s fiscal austerity plans are revealed.  One alternative plan is said to involve European Union members providing rescue financing to Greece.  Data released in the eurozone today saw German factory orders climb 4.3% m/m in January, up sharply from December’s upwardly revised -1.6% m/m print, while the year-on-year increase was 19.6% y/y.  European Central Bank member Paramo called on distressed Spanish banks to assume losses on their balance sheets when they occur and determine if they need to tie-up with stronger financial institutions.  ECB member Weber said the common currency will not become a weak currency.  In U.S. news, data released today saw weekly non-farm payrolls decline 36,000, off from the -26,000 January revision, while the February unemployment rate printed at 9.7%, below expectations.  February manufacturing payrolls actually evidenced 1,000 in job gains, down from the upwardly revised +20,000 result for January.  Other data released today saw February average hourly earnings increase 0.1% m/m and 1.9% y/y – both below expectations – while February average weekly hours worked ticked higher to 33.8.  The Fed reported January consumer credit expanded US$ 5 billion.  Chicago Fed President Evans said additional indications of a sustainable economic recocery are required before there’s more monetary tightening.  Euro bids are cited around the US$ 1.3335 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.60 level and was supported around the ¥88.95 level.  The pair moved higher on speculation Bank of Japan would move to expand its credit easing policies further despite months of wrangling between the central bank and the government.  Some BoJ-watchers are now reporting the central bank will ease further at its next meeting on 16-17 March despite comments from BoJ officials about the need to maintain fiscal discipline.  Others think the BoJ could ease in April when two Policy Board meetings are planned.  March Japanese government bond futures traded as high as 140.19 today, their highest level since 22 December 2009.  Shirakawa will attend the Bank for International Settlements meeting in Basel in Basel next week.  The Japanese government reportedly increased its allowance for foreign exchange intervention in the draft budget for its next fiscal year that starts at the end of this month.  Some dealers suggest the new government may have as much as ¥145 trillion with which to intervene.  Bank of Japan Policy Board member Noda this week reported “Maintaining fiscal discipline, in other words showing a road map and implementing it decisively in a timely manner, is critical” to keep interest rates low.  Noda also added deflation will continue through fiscal year 2011 and said overseas economies are Japan’s largest risk factor.  The Nikkei 225 stock index climbed 2.20% to close at ¥10,368.96.  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 ¥123.30 level and was supported around the ¥120.85 level.  The British pound moved higher vis-à-vis the yen as sterling tested offers around the ¥137.05 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥84.30 level. In Chinese news, the U.S. dollar appreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8265 in the over-the-counter market, up from CNY 6.8264.  Prime Minister Wen said the government wants to keep the Chinese yuan stable and improve the exchange rate mechanism.  China’s National People’s Congress started today and traders will pay close attention to any policy announcements.  Options traders have become considerably bullish on the prospect on additional yuan appreciation.”  PBoC is expected to raise banks’ reserve requirements further this year.

Technical Outlook at 1330 GMT (EDT + 0500)

                 (Bid Price)        (Today’s Intraday Range)    
              
EUR/ USD      1.3545                1.3606, 1.3529
USD/ JPY       90.17                  90.27,   88.97
GBP/ USD      1.5010                1.5064, 1.4991
USD/ CHF      1.0792                1.0809, 1.0750
AUD/USD       0.9046                0.9053, 0.8984
USD/CAD      1.0301                 1.0330,  1.0286
NZD/USD       0.6918                0.6922, 0.6853
EUR/ JPY       122.16                122.31, 120.87
EUR/ GBP      0.9026                0.9047, 0.9010
GBP/ JPY       135.33                135.70, 133.73
CHF/ JPY          3.57                 83.61   82.62

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