Daily Market Commentary

Fundamental Outlook at 1500 GMT (EDT + 0500)

€

The euro depreciated vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3535 level and was capped around the $1.3635 level.  Greek Prime Minister Papandreou said U.S. President Obama is “supportive” of the fiscal measures Greece is taking to improve its economic situation.  Papandreou added “We’re not askin for a bailout…we’re not asking for financial help from anyone.” The European Union today reported it is considering bannking “purely speculative” credit default swaps while German Chancellor Merkel is seeking stricter regulations on derivatives trading.  European Union ministers will convene next week to deliberate the next steps in the Greek budget deficit drama. Data released in Germany today saw January industrial production gained 0.6% m/m and 2.2% y/y.  European Central Bank member Weber indicated the creation of a European Monetary Fund would be “counterproductive,” putting him at potential odds with Chancellor Merkel.  The ECB withdrew a huge €295 billion today in a one-time fine-tuning operation.  This is the latest indication that ECB officials are becoming concerned with excess liquidity in the Eurozone’s system.  The ECB is expected to keep interest rates unchanged for the foreseeable future.  In U.S. news, data released today saw February NFIB small business optimism decline to 88.0 from the prior reading of 89.3.  Janaury wholesale inventories data will be released tomorrow followed by weekly initial jobless claims, continuing jobless claims, and January trade balance data on Thursday.  Friday’s data will include February retail sales, March University of Michigan consumer sentiment, and January business inventories.  Euro bids are cited around the US$ 1.3335 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥89.60 level and was capped around the ¥90.30 level. Nikkei reported Bank of Japan has started to examine the possibility of expanding its easing policy.  There is increasing speculation the central bank will ease monetary policy further as deflationary pressures worsen.  Some BoJ-watchers believe the central bank may expand a ¥10 trillion credit program for lenders when the Policy Board convenes next week.  Finance minister Kan has reiterated the central bank should target a positive inflation rate of at least one per cent per annum. BoJ Governor Yamaguchi in February warned that prices may not be improving as quickly as the economy.  Current BoJ forecasts predict prices excluding fresh food will decline through March 2012 but some economists believe the “core-core” price index excluding food and energy will decline until 2013.  Traders await the release of revised Q4 gross domestic product data on Thursday.  Data released in Japan overnight saw the January current account balance print at a stronger-than-expected ¥900 billion.  Other data saw February bank lending decline 1.3% y/y while the February M2+CD money supply rose 2.7% y/y.  The Nikkei 225 stock index lost 0.17% to close at ¥10,567.65.  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 ¥121.45 level and was capped around the ¥123.15 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥133.90 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥83.00 figure. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8263 in the over-the-counter market, down from CNY 6.8264.  Economists are speculating China’s inflation likely accelerated in February, possibly up 2.5% y/y in what would be the highest level in sixteen months.  International Monetary Fund Managing Director Strauss-Kahn reported the yuan is “still very much undervalued” and added China may permit the currency to appreciate in the coming months.  State Administration of Foreign Exchange head Yi Gang said China’s foreign exchange reserves are “suitably diversified.”

₤

The British pound came off vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.4935 level and was capped around the $1.5070 level.  Data released in the U.K. today saw the January trade in goods deficit increase to ₤8 billion.  Sterling remains under attack on potential political gridlock.  Many dealers believe that even if Tory leader Cameron wins the upcoming general election, his Conservative party may not win a majority in Parliament.  Cable bids are cited around the US$ 1.4455 level.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.9095 level and was supported around the ₤0.9045 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0805 level and was supported around the CHF 1.0725 level.  Data released in Switzerland today saw February consumer price inflation rise 0.1% m/m and 0.9% y/y while data released yesterday saw January retail sales rise 4.4%, more-than-expected.  There is ongoing speculation Swiss National Bank continues to intervene to prevent the franc from appreciating too much.  U.S. dollar offers are cited around the CHF 1.1045 level.  The euro came off vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.4615 level and was capped around the CHF 1.4635 level.  The British pound moved lower vis-à-vis the Swiss franc as the single currency tested bids around the CHF 1.6075 level and was capped around the CHF 1.6170 level.

Technical Outlook at 1330 GMT (EDT + 0500)

                  (Bid Price)        (Today’s Intraday Range)    

EUR/ USD      1.3590                1.3634, 1.3563
USD/ JPY       89.96                  90.32,   89.62
GBP/ USD      1.4985                1.5068, 1.4935
USD/ CHF      1.0759                1.0803, 1.0726
AUD/USD       0.9125                0.9146, 0.9054
USD/CAD       1.0270                1.0318, 1.0234
NZD/USD       0.7020                0.7034, 0.6960
EUR/ JPY       122.22                123.13, 121.44
EUR/ GBP      0.9066                0.9096, 0.9045
GBP/ JPY       134.77                136.07, 133.90
CHF/ JPY       83.58                  84.15   83.02

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