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$ 1.3675 level and was supported around the $1.3545 level.  The common currency has traded in about a 400-pip range for the past month or so as traders continue to deliberate the prospects of a larger credit crisis in the eurozone.  There has been less attention on Greece’s fiscal problems over the last several trading sessions and many dealers are speculating the country will be successful in resolving its financial imbalances.  Others, however, believe Greece, France, the European Union, or the International Monetary Fund will have to get involved in bailing out Greece.  Data released in the eurozone today saw the  German January trade surplus decline to €8.7 billion from €16.6 billion in December.  Also, German February consumer price inflation expanded 0.4% m/m and 0.6% y/y.  European Central Bank member Weber – likely the next President of the ECB after Trichet retires – continues to resist calls for the creation of a European Monetary Fund to provide countries with financial assistance during times of crisis.  Many German officials believe their eurozone partners need to be more vigilant with national finances and avoid fiscal crises such as the one Greece is currently experiencing.  In U.S. news, data released today saw MBA mortgage applications print at 0.5%, down from a revised 14.6%, while January wholesale inventories were off 0.2%, up from a downwardly revised -1.0% in December.  Also, the February monthly budget statement printed at –US$ 220.9 billion, wider than the previous reading of –US$ 193.9 billion.  Tomorrow’s data will include weekly initial jobless claims, continuing jobless claims, and January trade balance data.  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 depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥90.45 level and was supported around the ¥89.85 level.  Bank of Japan is moving closer to easing monetary policy further according to a wider contingent of the financial media.  The central bank’s Policy Board convenes next week and some dealers believe it may expand a ¥10 trillion credit program for lenders when officials convene next week.  The government is pushing the BoJ to ease further and/ or to target inflation growth of at least one per cent per year.  Dealers continue to cite year-end repatriation flows as one factor that has been supporting the yen. Data released in Japan overnight saw January core machinery orders decline 3.7% m/m.  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.  The Nikkei 225 stock index lost 0.003% to close at ¥10,563.92.  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 ¥123.15 level and was supported around the ¥121.85 level.  The British pound moved higher vis-à-vis the yen as sterling tested bids around the ¥135.20 level while the Swiss franc moved higher vis-à-vis the yen and tested offers around the ¥84.25 level. In Chinese news, the U.S. dollar depreciated vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8260 in the over-the-counter market, down from CNY 6.8263.  Data released in China overnight saw February exports expand 46%, their largest increase in three years and a positive indication of improving global economic growth.  International Monetary Fund Managing Director Strauss-Kahn this week 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.”

Technical Outlook at 1330 GMT (EDT + 0500)


                 (Bid Price)        (Today’s Intraday Range)    

EUR/ USD      1.3615                 1.3622, 1.3544
USD/ JPY       90.40                  90.47,   89.83
GBP/ USD      1.4935                 1.5015, 1.4870
USD/ CHF      1.0735                 1.0793, 1.0731
AUD/USD       0.9164                 0.9169, 0.9130
USD/CAD       1.0256                 1.0291, 1.0251
NZD/USD       0.7064                 0.7074, 0.7020
EUR/ JPY       123.06                 123.15, 121.87
EUR/ GBP      0.9114                 0.9128, 0.9058
GBP/ JPY       135.00                 135.20, 133.89
CHF/ JPY       84.16                   84.22,   83.33

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