BillyT's Forex Daily Currency-Trading Reviews for 7 August 2007

BillyT's Forex Daily Currency-Trading Reviews for 7 August 2007

EURO:

The euro weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3755 level and was capped around the $1.3815 level. Technically, today’s intraday low was just below the 61.8% retracement of the move from $1.3850 to $1.3610. Traders await the Federal Open Market Committee’s interest rate decision and policy statement later in the North American session. Most traders do not expect the Fed will vow to bail out the volatile financial markets but will address the impact of the current repricing of risk in the U.S. credit markets. Recent inflation data will likely afford the FOMC a little bit of leeway to move closer to a neutral bias from its ongoing tightening bias. U.S. equity markets could sell off if they perceive the Fed’s statement to not be amply supportive of the U.S. capital markets or the U.S. mortgage market and housing sector. Data released in the U.S. today saw Q2 non-farm productivity rise 1.8%, less-than-expected but up from +0.7% in Q1. Also, unit labour costs were up 2.1% in Q2, more-than-expected but lower than the revised 3.0% gain in Q1. Notably, unit labour costs are higher 4.5% y/y, the largest annual gain since Q3 2000 with productivity up +0.6% y/y. The U.S. dollar gained some ground on news that U.S. home loans giant Fannie Mae asked federal regulators to raise the limit on the amount of mortgage securities it is permitted to hold as investments. In eurozone news, German industrial production was off 0.4% m/m in June and were up +5.1% y/y. European Central Bank member Kranjec today indicated the ECB is leaning towards a monetary tightening in September but warned that the U.S. subprime mortgage meltdown “could negatively impact household demand (in the eurozone).” Euro bids are cited around the US$ 1.3625 level.

YEN:

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥118.30 level and was capped around the ¥118.90 level. Technically, today’s intraday low was just below the 38.2% retracement of the move from ¥109.00 to ¥124.15. The Japanese government kept its assessment of the economy unchanged in its August report but included an upgraded assessment of employment and the exports sector. Machinery orders data will be released overnight and will be closely watched ahead of Bank of Japan’s interest rate deliberations later this month. Many traders believe BoJ’s Policy Board will lift the overnight call rate by +25bps to +0.75% while others believe the central bank will not lift rates until later this year. The Nikkei 225 stock index gained +0.04% to close at ¥16,921.77. Dollar bids are cited around the ¥116.55 level. The euro lost ground vis-à-vis the yen as the single currency tested bids around the ¥162.85 level and was capped around the ¥164.15 level. The British pound and Swiss franc depreciated vis-à-vis the yen as the crosses tested bids around the ¥239.15 and ¥99.15 levels, respectively. In Chinese news, the yuan’s central parity rate vis-à-vis the U.S. dollar was set at CNY 7.5690, up from CNY 7.5598.

BRITISH POUND:

The British pound extended recent losses vis-à-vis the U.S. dollar today as cable tested bids around the US$ 2.0185 level and was capped around the $2.0335 level. The pair is just above its lowest level since 10 July and traders are eyeing the $2.0135 level as the pair’s next downside target. Data released in the U.K. today saw BRC July retail sales growth at its lowest level in seven months, up 1.2% y/y. Also, NIESR estimated the U.K. economy expanded by 0.8% in the three months to July. Sterling is also on the defensive on account of the outbreak in foot-and-mouth disease in the U.K. Cable bids are cited around the US$ 2.0140 level. The euro moved higher vis-à-vis the British pound as the single currency tested offers around the £0.6815 level and was supported around the £0.6785 level.

SWISS FRANC:

The Swiss franc weakened vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.1960 level and was supported around the CHF 1.1890 level. Technically, today’s intraday high was right around the 38.2% retracement of the move from CHF 1.2165 to CHF 1.1815. Traders await the release of the July unemployment rate tomorrow. Dollar offers are cited around the CHF 1.2030 level. The euro and British pound slumped vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.6410 and CHF 2.4080 levels, respectively.


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