Weekly Market Commentary by GCI Financial Ltd

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.4825 level and was supported around the $1.4695 level. The pair gained about 60 pips last week. The FOMC meeting minutes from 11 December saw the economic situation as ?quite fluid? with an ?unusually certain? outlook requiring ?exceptional? alertness. Policymakers said the economy appeared to have ?deteriorated significantly? after the 30-31 October FOMC meeting. Fed funds futures are pricing in a 50% chance the FOMC will reduce the fed funds target rate by 50bps on 31 January. 10-year U.S. yields are at 2 ½ – year lows.

The euro appreciated vis-à-vis the U.S. dollar last week as the single currency tested offers around the $1.4825 level and was supported around the $1.4695 level. The pair gained about 60 pips last week. The FOMC meeting minutes from 11 December saw the economic situation as ?quite fluid? with an ?unusually certain? outlook requiring ?exceptional? alertness. Policymakers said the economy appeared to have ?deteriorated significantly? after the 30-31 October FOMC meeting. Fed funds futures are pricing in a 50% chance the FOMC will reduce the fed funds target rate by 50bps on 31 January. 10-year U.S. yields are at 2 ½ – year lows.

ECB?s Weber hawkishly warned higher EMU-13 inflation can?t lead to higher wage negotiations. Germany?s DIW institute sees GDP growth around 1.8% in 2008. German economy minister Glos said German economic risks ?have become larger.? ECB?s Orphanides said the ECB?s staff inflation estimates are ?too optimistic.?

Data released in the U.S. last week saw November existing home sales up 0.4% m/m and off 20% y/y; December PMI fell to 47.7, the first contraction in 10 months; November construction spending was up 0.1%; November headline factory orders were up 1.5% with ex-transportation up 1.4%; weekly initial jobless claims were off 21,000 to 336,000; December ADP private payrolls were up 40,000; December NFPs were up 18,000 with a cumulative +10,000 revision to October?s and November?s tallies; the December unemployment rate moved higher to 5.0%; average hourly earnings were up 0.4% m/m and 3.7% y/y; and the December ISM services index fell to 53.9.

Data released in the eurozone last week saw EMU-13 December manufacturing PMI print at 52.6; the EMU-13 money supply was unchanged at 12.3%; Germany?s November unemployment rate fell to 8.4%; EMU-13 December harmonized consumer price inflation printed at 3.1%; and the EMU-13 PMI services index printed at 53.1.

 

Technical Outlook

 

Last week?s high (1) was above the 76.4% retracement of the 1.4967-1.4309 range and last week?s low (2) was above the 50.0% retracement of the same range. The 1.4812/ 1.4908/ 1.4967/ 1.5030/ 1.5120 levels represent upside resistance targets while the 1.4716/ 1.4638/ 1.4560/ 1.4404/ 1.4378 levels represent downside support targets.

 

¥/ CNY

 

The yen appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the ¥107.85 level and was capped around the ¥112.55 level. The pair lost about 390 pips last week. The Nikkei 225 stock index closed at ¥14,691.41. The government may reduce GDP growth forecasts for the FY to March 2008 to 1.3%. Tokyo Shimbun reported 40% of major Japanese firms see a slowing economy. BoJ may slash growth forecasts for the current fiscal year to March 2008 to 1.3%.

 

The Chinese yuan appreciated vis-à-vis the U.S. dollar last week as the greenback closed at CNY 7.2732 in the over-the-counter market, down from CNY 7.3694. The pair traded with a CNY 7.2 handle for the first time since the yuan revaluation of July 2005. The Chinese government sees 2008 GDP growth around 10.8% with CPI around 4.5%. PBoC reaffirmed it will tighten policy further in 2008 and reform exchange rate policy.

 

Data released in China last week saw the CLSA December PMI improve to 53.3 while the CFLP PMI survey slipped to 55.3.

 

Technical Outlook

 

Last week?s high (1) was right at the 50.0% retracement of the 117.92-107.20 range and last week?s low (2) was below the 23.6% retracement of the same range. Upside resistance targets remain the 108.96/ 110.04/ 111/80/ 112.89 levels while downside support targets remain the 107.20/ 106.53/ 104.19/ 101.67 levels.

 

£

 

The British pound depreciated vis-à-vis the U.S. dollar last week as cable tested bids around the US$ 1.9670 level and was capped around the $2.0100 figure. The pair lost about 210 pips last week. Many traders believe the BoE MPC will ease the repo rate by 25bps this week. BoE reported mortgage availability fell ?materially? in Q4.

 

Data released in the U.K. last week saw the CIPS December PMI survey decline to 52.9; Land Registry November house prices in England and Wales were up 0.6% m/m; CIPS December construction PMI rose to 56.0 from 54.3 in November; the December CIPS PMI services survey improved to 52.4; November net mortgage landing rose to £7.8 billion; Q4 Nationwide annual house price growth fell to 6.9%; IDS pay settlements rose to 4.0% for the three months to January; and November mortgage approvals printed at 83,000.

 

Technical Outlook

 

Last week?s high (1) was below the 50.0% retracement of the 1.9182-2.1159 range and last week?s low (2) was just above the 76.4% retracement of the same range. Upside resistance targets include the 1.9837/ 1.9937/ 2.0007/ 2.0149 levels while downside support targets include the 1.9648/ 1.9588/ 1.9259/ 1.9182/ 1.9103 levels.

 

CHF

 

The Swiss franc appreciated vis-à-vis the U.S. dollar last week as the greenback tested bids around the CHF 1.1020 level and was supported around the CHF 1.1280 level. The pair lost about 190 pips last week. Heightened geopolitical risks led to safe-haven buying of the franc.

 

 

Data released in Switzerland last week saw December CPI up 0.2% m/m and 2.0% y/y.

 

Technical Outlook

 

Last week?s high (1) was right at the 38.2% retracement of the 1.1894-1.0885 range and last week?s low (2) was below the 76.4% retracement of the same range. Upside resistance targets include the 1.1123/ 1.1286/ 1.1323/ 1.1493/ 1.1680 levels while downside support targets include the 1.0885/ 1.0740/ 1.0629/ 1.0532 levels.

 

CAD

 

The Canadian dollar depreciated vis-à-vis the U.S. dollar last week as the greenback tested offers around the C$ 1.0035 level and was supported around the C$ 0.9805 level. The pair gained about 190 pips last week. Many traders believe BoC will expand monetary policy in Q1.

 

Data released in Canada last week saw the Ivey PMI survey fall to 48.0; the November industrial product price index rose 0.6% m/m; and the raw materials price index climbed 3.4%.

 

Technical Outlook

 

Last week?s high (1) was above the 23.6% retracement of the 0.9055-1.0248 range and last week?s low (2) was right around the 38.2% retracement of the same range. Upside resistance targets include the 1.0174/ 1.0248/ 1.0438/ 1.0794 levels while downside support targets include the 0.9747/ 0.9482/ 0.9300/ 0.9230/ 0.9140/ 0.9055 levels.

 

 

AUD

 

The Australian dollar depreciated vis-à-vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.8730 level and was capped around the US$ 0.8835 level. The pair lost about 5 pips last week.

 

Data released in Australia last week saw Australian November private sector credit growth up 1.7% m/m and 16.2% y/y while the December performance of services index climbed to 56.9.

 

Technical Outlook

 

Last week?s high (1) was below the 38.2% retracement of the 0.9399-0.8549 range and last week?s low (2) was just above the 23.6% retracement of the same range. Upside resistance targets include the 0.8750/ 0.8828/ 0.8988/ 0.9062/ 0.9114/ 0.9223/ 0.9340/ 0.9420 levels while downside support targets include the 0.8536/ 0.8332/ 0.8080 levels.

 

SCHEDULE

 

Sunday, 6 January 2008

 

all times GMT

 

(last release in parentheses)

2145 NZ November trade balance (-NZ$ 690.0 million)

2230 Australia December performance of construction index (53.2)

2350 Japan December monetary base (1.0%)

Monday, 7 January 2008

 

all times GMT

 

(last release in parentheses)

N/A Germany December wholesale price index (1.0% m/m)

N/A Germany December wholesale price index (5.7% y/y)

N/A Germany November retail sales (-3.3% m/m)

N/A Germany November retail sales (-0.6% y/y)

0645 CH December unemployment rate (2.7%)

0700 CH Central bankers convene at Bank for International Settlements

1000 Eurozone November PPI (0.6% m/m)

1000 Eurozone November PPI (3.3% y/y)

1000 Eurozone November unemployment rate (7.2%)

1000 Eurozone December business climate indicator

1000 Eurozone December consumer confidence indicator (-8)

1000 Eurozone December economic confidence indicator

1000 Eurozone December industrial confidence (3)

1000 Eurozone December services confidence (14)

1740 US Atlanta Fed President Lockhart speaks

 

Tuesday, 8 January 2008

 

all times GMT

 

(last release in parentheses)

0030 Australia November building approvals (-2.8% m/m)

0030 Australia November building approvals (9.1% y/y)

1000 Eurozone November retail sales (-0.7% m/m)

1100 Germany November factory orders (4.0% m/m)

1100 Germany November factory orders (14.0% y/y)

1100 UK December BRC retail sales monitor

1320 US Philadelphia Federal Reserve President Plosser speaks

1500 US November pending home sales (0.6% m/m)

1500 US Boston Fed President Rosengren speaks

2000 US November consumer credit (US$ 4.7 billion)

 

Wednesday, 9 January 2008

 

all times GMT

 

(last release in parentheses)

0001 UK December Nationwide consumer confidence (86)

0030 Australia November job vacancies (2.9%)

0030 Australia November retail sales (0.2%)

0200 NZ December ANZ commodity prices (0.8%)

0700 Germany November trade balance (?18.7 billion)

0700 Germany November current account (?13.7 billion)

0745 France November trade balance

1000 Eurozone Q3 GDP (0.7% q/q)

1000 Eurozone Q3 GDP (2.7% y/y)

1030 UK December BRC shop price index

1100 Germany November industrial production (-0.3% m/m)

1100 Germany November industrial production (6.0% y/y)

1200 US MBA mortgage applications

1315 Canada December housing starts (227,900)

1430 US St. Louis Federal Reserve President Poole speaks

1530 UK November leading indicator index (0.2% m/m)

1530 UK November coincident indicator (0.1% m/m)

 

Thursday, 10 January 2008

 

all times GMT

 

(last release in parentheses)

0030 Australia November trade balance (-A$ 2.983 billion)

0130 Japan Bank of Japan Deputy Governor Muto speaks

0500 Japan November leading economic index (18.2%)

0500 Japan November coincident index (70.0%)

0745 France November industrial production

0745 France November manufacturing production (3.7% y/y)

0930 UK November trade balance (-£7.115 billion)

1200 UK Bank of England Monetary Policy Committee interest rate decision

1245 Eurozone European Central Bank interest rate decision

1330 Eurozone European Central Bank President Trichet speaks

1330 US Weekly initial jobless claims

1330 US Continuing jobless claims

1330 Canada November new housing price index (0.1% m/m)

1330 Canada November building permits (6.8% m/m)

1500 US November wholesale inventories (0.0%)

1800 US Kansas City Fed President Hoenig speaks

1830 US December ICSC chain store sales (3.5% y/y)

2350 Japan December M2+CD money supply (2.0%)

2350 Japan December broad liquidity (3.5%)

2350 Japan December bank lending (1.3% y/y)

 

Friday, 11 January 2008

 

all times GMT

 

(last release in parentheses)

0500 Japan December economy watchers? survey, current (38.8)

0500 Japan December economy watchers? survey, outlook

0930 UK November industrial production (0.4% m/m)

0930 UK November industrial production (1.0% y/y)

0930 UK November manufacturing production (0.3% m/m)

0930 UK November manufacturing production (0.3% y/y)

1200 Canada December unemployment rate (5.9%)

1200 Canada December employment, net change (42,600)

1330 US November trade balance (-US$ 57.8 billion)

1330 US December import price index (2.7% m/m)

1330 US December import price index (11.4% y/y)

1330 Canada November international merchandise trade

1800 US Boston Federal Reserve President Rosengren speaks

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