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DAILY MARKET COMMENTARY
7 January 2004
Wednesday

North American Comment at 1500 GMT

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GCI Foreign Exchange Research: http://www.gcitrading.com/fxnews/
FX Research Desk: fxnews@gcitrading.com
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Fundamental Outlook at 1500 GMT (EDT + 0500)



The euro lost ground vis-vis the U.S. dollar today as the single currency tested bids around the US$ 1.2645 level during European dealing but reclaimed the $1.2700 figure during early North American dealing. The single currency was dented by news that EUs Solbes will urge legal action against EMU-12 countries that decided to effectively suspend the EUs Growth and Stability Pact in November. This decision to suspend was largely enacted to give Germany and France some breathing room fiscally over the next couple of fiscal years but actually contravened the underpinnings that made the euro a reality in the first place. To most traders, this is seen as a members-only spat that should not decrease demand for euros, particularly if Germany and France are able to maintain elevated fiscal spending levels. There was some verbal intervention from German officials overnight with Economy Minister Clement suggesting the export sector can deal with the euro at current levels while ECBs Welteke said German firms can cope with the current exchange rate. Welteke also said euros rise reflected market moves and that central banks cannot influence the exchange rate. Data released in the eurozone today saw the ECs economic sentiment index decline to 95.6 in December while the business climate indicator also fell last month. Also, Frances December consumer sentiment was unchanged at -30 while Italys December service sector confidence rose to +24. Traders await word from Fed Governor Kohn at 0100 GMT tonight. Interestingly, Bank of China and Construction Bank of China addressed rumours that Chinese financial institutions are dumping U.S. dollars and U.S. Treasuries as they readjust their capital structures. Euro stops are cited below the $1.2650 level with additional bids cited around the $1.2615 level. Euro offers are seen around the $1.2700 figure with additional selling pressure around the $1.2740/ 50 level. Option traders cite talk of a $1.2600 option barrier that rolls off today.







The yen advanced vis-vis the U.S. dollar today as the greenback traded below the 106.00 figure for the first time since September 2000. Dealers were unable to lift the pair above offers around the 106.45 level overnight but some strong bids emerged around the 105.90 level during North American dealing. Market chatter that Japanese investors were heavy buyers in a EUR 9.0 billion 10-year German Bund auction overnight kept a floor on the dollar, led by gains in the euro/ yen cross. More details about options positions emerged today as it was reported there is a 105.80/ 109.80 DNT that matures on 16 January with the bottom leg cited as an option barrier. Also, the 105.00 figure is cited as the downside leg of a 105.00/ 120.00 DNT structure that rolls off on 3 March. Collectively, these lower options legs should support the dollar. Japanese sources are claiming that Japanese monetary authorities have already spent some 3 trillion in yen-selling interventions this week, perhaps an indication of newfound vigilance in 2004. The Nikkei 225 stock index finished 0.52% lower today with investors fretting about a stronger yen. Dollar offers are cited around the 106.50 level. The euro sank fast vis-vis the yen during Australasian dealing, finding itself offered below the 134.50 level before being rejuvenated by the German Bund auction that saw it rise back above the 134.75 level. Euro bids are cited around the 134.25 level with offers seen around the 135.50 level.







The British pound spiked to the US$ 1.8260 level during Australasian dealing but quickly came off and tested bids around the $1.8120 level during European dealing. Stops were triggered below the $1.8180 level during the move downward. Cable has now appreciated some 10% since November and is in desperate need of a correction downward. Technically, the $1.7635 level will be an important level of technical support when the pound finally decides to come back to Earth. Ahead of that level, however, some demand for cable is seen around the $1.7865 level. Bank of Englands Monetary Policy Committee started its two-day policy deliberations today and is not expected to change policy but the pounds lofty level will clearly invigorate the monetary doves on the Board. Cable bids are cited around the $1.8120 level. The euro receded vis-vis the British pound today as the single currency tested bids around the 0.6965 level. Euro bid are cited around the 0.6950/ 35 levels.





CHF

The Swiss franc lost ground vis-vis the U.S. dollar today as the greenback tested offers around the CHF 1.2415 level during European dealing. Stops were triggered above the CHF 1.2360 level during the greenbacks ascent today. Data released in Switzerland today saw December CPI unchanged m/m and up +0.6% y/y. There is a concern that the rising Swiss franc could snuff out the Swiss economic recovery but this is probably not the case as long as the euro holds up in the cross vis-vis the franc. SNB added one-week liquidity at 0.11% today, the same rate it has used since 2 April 2003. The euro failed to advance past the CHF 1.5720 level today but was supported around the CHF 1.5665 level.





Technical Outlook at 1330 GMT (EDT + 0500)

(Bid Price) (Todays Intraday Range) (Previous High, Low, Close)

EUR/ USD 1.2691 1.2746, 1.2647 1.2813, 1.2667, 1.2727
USD/ JPY 106.15 106.44, 106.13 106.44, 106.05, 106.20
GBP/ USD 1.8194 1.8262, 1.8119 1.8288, 1.8048, 1.8215
USD/ CHF 1.2356 1.2416, 1.2303 1.2345, 1.2241, 1.2317
AUD/ USD 0.7698 0.7708, 0.7651 0.7729, 0.7657, 0.7697
USD/CAD 1.2878 1.2929, 1.2852 1.2869, 1.2764, 1.2859
NZD/ USD 0.6728 0.6732, 0.6676 0.6748, 0.6681, 0.6716
EUR/ JPY 134.75 135.36, 134.27 136.05, 134.49, 135.14
EUR/ GBP 0.6975 0.6999, 0.6966 0.7024, 0.6979, 0.6988
EUR/ CHF 1.5685 1.5718, 1.5663 1.5708, 1.5613, 1.5676
GBP/ JPY 193.15 193.99, 192.39 194.10, 191.62, 193.43
CHF/ JPY 85.91 86.35, 85.46 86.73, 86.06, 86.22




Support Resistance Support Resistance

EUR/ USD USD/ JPY

L1. 1.2400 1.2660 106.75 110.60
L2. 1.2325 1.2730 106.00 111.20
L3. 1.2225 1.2790 105.00 112.00



GBP/ USD USD/ CHF

L1. 1.7400 1.7775 1.2350 1.3200
L2. 1.7330 1.7825 1.2270 1.3300
L3. 1.7250 1.7900 1.2200 1.3400



AUD/ USD USD/ CAD

L1. 0.7000 0.7580 1.2900 1.3500
L2. 0.6960 0.7650 1.2830 1.3575
L3. 0.6910 0.7725 1.2770 1.3660



NZD/ USD EUR/ JPY

L1. 0.6350 0.6580 130.40 135.75
L2. 0.6300 0.6620 129.90 136.50
L3. 0.6250 0.6670 129.25 137.30



EUR/ GBP EUR/ CHF

L1. 0.6800 0.7170 1.5450 1.5750
L2. 0.6750 0.7250 1.5410 1.5800
L3. 0.6700 0.7310 1.5370 1.5860



GBP/ JPY CHF/ JPY

L1. 185.50 192.30 78.90 87.00
L2. 185.00 193.00 78.30 87.60
L3. 184.00 194.00 77.25 88.25

Thanks for your great input, Hilary.

Have come unstuck on Euro/GBP longs after adding several times while it dropped. I needed only a 30-point rise to 7050 and I would have taken a good profit, but it never got there. Have closed for a fair loss and still have one open, which I will close when (if) it rebounds from 6950 as Saxobank have suggested it should. Must then be patient to get some back, but not for a few days, I think, when a trend has been established. Zarif oput me on to Saxobank - they have suggested trading strategies (which I checked too late) and it's free with their simulated trading station.

Sue - I deal s/b with cmc and IG Index.

Zarif, hope you have closed your Euro/$ long for a massive profit.

mg: I closed the eurdoll with a good gain yesterday and at the moment am following saxo advise and am standing aside as i think the BOE/ECB meetings are tomorrow. I personally think that EUR/Doll will reach 1.3 but before that possibly tomorrow correct itself to 1.25 area then uptrend again. Was thinking that if USD/CAD if reaches 1.3-1.3100 area then go for a short.

rgds
zarif

Sue42,
I use finspreads, mainly 'cos of the spreads eg. /$ 8pts v's IG's 12pts for March future, both open hours & range of products are better though at IG.

EUR/USD looks like it might be finding some support on the 5 minute chart.

edit: Long stops a move below 1.2580

Sue42.....I use CMC spreadbet for currency trading
spreads as follows...
GBP/USD.....5
EUR/USD.....4
USD/JPY.....4
USD/CHF.....5
You don't get requotes and they trade from Sun 8.30 pm
to Fri 9.15pm continuosly
Margin requirements are 150 per 1 point bet.
Hope thats of some help.

cloudbase - do they charge interest on positions?

I believe Etrade are 2 ticks for EUR/USD with a commission of 9.95 per trade

This is the levels i am watching to get on the trades at present.

buy eur/usd : 1.2580 stp loss 1.2425 target 1.300

buy gbp/usd : 1.8115 stp loss 1.8010 target 1.845

sell usd/swiss franc CHF: sell usd at 1.2500 stp loss 1.2620 target 1.2000

Sell USD/CAnadian dollar: 1.2960 stp loss 1.3080 target 1.22


Bought the euro b 4 the ecb and it paid well.
Bought eur/chf march at 1.5634 at looking at target of 1.5830 stp at1.5534

rgds
zarif

Spike on the USD/JPY on BoJ buying ..... the dollar bears just spray into the rise to knock it back again, such is their confidence. EUR/USD looks to be starting the next leg up now.

well that just cost the bank of japan 5 billion, "owch"

Spike up of 60 points on /USD - and I've got a small short on it that was +10 !!! What can cause that? Presumably compuetrs cut in.

Payrolls, maggot. I'm long EUR/USD and was starting to get a bit twitchy as it was testing the support line of the 2 day uptrend.

Tally Ho. Chocks away, Biggles.

Hilary your mail made me Blush :7)

Do you know Pascal, B?

Hil

One of my favourite quotes "The formal demands of logic cannot always have the final word" - Blaise Pascal.

One and the same?

Al,

Actually, Pascal's the Chef at Club Gascon.

Nice quote though.

:o)

;-)

I should've known!

No sugar Lips But you could introduce Me !

I'm sorry to be contrarian B, but offal and goose fat really don't do anything for me.