GCI Forex Research

Daily Market Commentary

2 July 2009
Thursday

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GCI Foreign Exchange Research:                    www.gcitrading.com/fxnews/
FX Research Desk:                                             fxnews@gcitrading.com
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Fundamental Outlook at 1400 GMT (EDT + 0400)

  

€

 

The euro moved sharply lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3990 level and was capped around the $1.4155 level.  The common currency gaved back most of yesterday’s gains ahead of the long holiday weekend in the U.S.  As expected, the European Central Bank kept monetary policy unchanged and ECB President Trichet reported interest rates remain “appropriate.”  Trichet also said recent economic data indicate the global economy has reached an “inflection point in the cycle” and said policymakers “have to remain very alert.”  He added risks to the economic outlook are “balanced” and added inflation expectations are “anchored.” Most traders walked away with the impression that official eurozone interest rates will remain unchanged for quite some time.  The ECB will begin buying covered bonds – including mortgages and public sector debt – on 6 July as part of its quantitative easing framework.  The euro also moved lower after Ireland’s credit rating was downgraded by Moody’s and after it was reported the EMU-16 unemployment rate climbed to 9.5% in May, the highest level in ten years.  Also, eurozone producer prices were off for a tenth consecutive month in May, down 0.2% m/m and 5.8% y/y, the largest annual decline since at least January 1982.  In U.S. news, it was reported that June non-farm payrolls fell by 467,000, much worse than the -325,000 forecast.  The national unemployment rate rose to 9.5%, less than expected, but many economists continue to suggest the national unemployment rate will reach the psychologically-important 10.0% level.  Average hourly earnings were up 2.7% y/y, below expectations.  Euro bids are cited around the US$ 1.3435 level.

 

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥95.80 level and was capped around the ¥96.85 level.  New Economy and Fiscal Policy minister Hayashi warned “Japan may slip back into deflation if the strength of the recovery is weak and the output gap keeps falling.  We don’t want deflation to become the main scenario.” Prime Minister Aso must call a general election by September and current polls show his Liberal Democratic Party of Japan trailing the opposition Democratic Party of Japan.  Data released in Japan overnight saw the June monetary base up 6.4% y/y.  Vice finance minister Sugimoto said he is unaware if Group of Eight leaders will discuss a replacement of the U.S. dollar as the world’s key reserve currency when policymakers convene this month.  Notably, the yen’s value on a trade-weighted basis declined to its lowest level since October 2008, trading at ¥114.80.  The Nikkei 225 stock index lost 0.64% to close at ¥9,876.15.   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 ¥134.10 level and was capped around the ¥136.75 level.  The British pound moved lower vis-à-vis the yen as sterling tested bids around the ¥156.85 level while the Swiss franc moved lower vis-à-vis the yen and tested bids around the ¥88.30 level. In Chinese news, the U.S. dollar moved lower vis-à-vis the Chinese yuan as the greenback closed at CNY 6.8304 in the over-the-counter market, down from CNY 6.8331.  Vice foreign minister He Yafei reiterated China’s calls for a diversification of foreign reserves and a stable dollar.  Group of Eight officials convene in Italy next week and may discuss China’s proposal regarding a new international reserve currency.

 

Technical Outlook at 1230 GMT (EDT + 0400)

 

          (Bid Price)        (Today’s Intraday Range)                    

              

EUR/ USD      1.4008                1.4154, 1.3997
USD/ JPY          96.07                  96.87,   95.86
GBP/ USD      1.6374                1.6498, 1.6322
USD/ CHF      1.0840                1.0866, 1.0740
AUD/ USD      0.8077                0.8108, 0.8022
USD/CAD       1.1477                1.1653, 1.1446
NZD/USD        0.6422                0.6473, 0.6385
EUR/ JPY        134.45                136.76, 134.41
EUR/ GBP      0.8553                0.8629, 0.8548
GBP/ JPY       157.15                159.33, 156.83
CHF/ JPY          88.49                  89.95,   88.43

 

 

                      

Support                      Resistance                  Support               Resistance

  

EUR/ USD                                                          USD/ JPY

 

 

L1.       1.3915                         1.4295                            94.25                          98.85

L2.       1.3720                         1.4630                            91.90                        101.65

L3.       1.3400                         1.5105                            90.05                        105.05

 

   GBP/ USD                                                        USD/ CHF

 

L1.       1.6000                         1.6740                         1.0510                         1.0980

L2.       1.5690                         1.6830                         1.0275                         1.1270

L3.       1.5440                         1.7470                         0.9750                         1.1555

 

 AUD/ USD                                                       USD/ CAD

 

L1.       0.7715                         0.8250                         1.0725                         1.1175

L2.       0.7440                         0.8555                         1.0580                         1.1315

L3.       0.7165                         0.9050                         1.0305                         1.1430

 

 

 NZD/ USD                                                       EUR/ JPY

 

L1.       0.6305                         0.6665                         131.30                         141.50

L2.       0.6020                         0.6945                         127.65                         146.80

L3.       0.5655                         0.7760                         121.70                         150.60

 

  EUR/ GBP                                                       EUR/ CHF

 

L1.       0.8320                         0.8770                         1.4905                         1.5380

L2.       0.7870                         0.9080                         1.4670                         1.5580

L3.       0.7590                         0.9355                         1.4420                         1.5880

 

  GBP/ JPY                                                        CHF/ JPY

 

L1.       152.60                         167.30                           87.55                          93.55

L2.       148.55                         172.10                           85.70                          97.90

L3.       142.05                         178.75                           82.90                        105.05

 

SCHEDULE

    

Thursday, 2 July 2009
all times GMT
(last release in parentheses)

 

0130    NZ                   June ANZ commodity prices (2.7%)

0130    Australia          May trade balance (-A$ 91 million)

0830    UK                  June PMI, construction (45.9)

0900    Eurozone         May unemployment rate (9.2%)

0900    Eurozone         May producer price index (-1.0% m/m)

0900    Eurozone         May producer price index (-4.6% y/y)

1145    Eurozone         European Central Bank interest rate decision

1230    US                   June non-farm payrolls, net change (-345,000)

1230    US                   June unemployment rate (9.4%)

1230    US                   June average hourly earnings (0.1% m/m)

1230    US                   June average hourly earnings (3.1% y/y)

1230    US                   June average weekly hours (33.1)

1230    US                   Weekly initial jobless claims

1230    US                   Continuing jobless claims

1400    US                   May factory orders (0.7%)

2330    Australia          June performance of service index (39.9)

 

Friday, 3 July 2009
all times GMT
(last release in parentheses)

 

0715    CH                  June consumer price index (0.2% m/m)

0715    CH                  June consumer price index (-1.0% y/y)

0745    Italy                 June PMI, services

0750    France             June PMI, services

0755    Germany         June PMI, services

0800    Eurozone         June PMI, composite

0830    UK                  June PMI, services (51.7)

0830    UK                  Bank of England housing equity withdrawal (-₤8.0 billion)

0900    Eurozone         May retail sales (0.2% m/m)

0900    Eurozone         May retail sales (-2.3% y/y)

 

DISCLAIMER: GCI’s Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be U.S.ed as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.