DAILY MARKET COMMENTARY
10 July 2008

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 weakened vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.5690 level and was capped around the $1.5760 level.  Technically, today’s intraday high was right around the 50% retracement of the move from $1.5910 to $1.5610.  NYMEX crude oil futures for August delivery were flat for the day through early North American dealing and this capped the euro’s upside.  The European Central Bank’s July monthly bulletin reported “ Growth in household spending is expected to continue at a modest pace during the remainder of 2008, mainly on account of the real income losses resulting from higher prices, a slower pace of employment growth and wealth effects, in particular from lower house price growth.” The ECB added “Recent price increases may have affected household spending more than during past episodes of relatively short-lived price increases.”  Germany’s DIW lifted its Q3 GDP growth forecast to 0.3% from 0.2% in Q2. In U.S. news, traders await remarks from Federal Reserve Chairman Bernanke and Treasury Secretary Paulson later today on regulatory oversight.  Data released in the U.S. today saw weekly initial jobless claims fall 58,000 to 346,000 while continuing jobless claims rose 91,000 to 3.202 million – the highest level since December 2003.  Euro bids are cited around the $1.5645/ $1.5230 levels.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥107.40 level and was supported around the ¥106.70 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from ¥124.15 to ¥95.70.  Data released in Japan overnight saw the June corporate goods price index up 5.6%, the fastest rise in 27 years.  These data evidence escalating inflation pressures but will likely not result in a rate hike from Bank of Japan’s Policy Board at this time.  Other data saw the May current account surplus fall 5.9% to ¥2.0 trillion.  The Nikkei 225 stock index climbed 0.12% to close at ¥13,067.21.  Dollar bids are cited around the ¥103.00/ 101.35 levels.  The euro moved higher vis-à-vis the yen as the single currency tested offers around the ¥168.65 level and was supported around the ¥167.80 level.  The British pound and Swiss franc moved higher vis-à-vis the yen as the crosses tested offers around the ¥212.15 and ¥104.00 figures, respectively. The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8428 in the over-the-counter market, down from CNY 6.8570 and the pair’s lowest close since the yuan revaluation of July 2005.  Data released in China overnight saw June exports up 17.6% y/y.

₤

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.9710 level and was capped around the $1.9835 level.  Technically, today’s intraday low was right around the 50% retracement of the move from $1.9405 to $2.0005.  As expected, Bank of England’s Monetary Policy Committee kept its benchmark repo rate unchanged at 5.00% for the third month running.  Minutes from today’s meeting will be released on 23 July.  Data released in the U.K. today saw Halifax house prices off 2.0% m/m and 6.1% y/y in the three months to June.  Cable bids are cited around the US$ 1.9360/ 1.9100 levels.  The euro moved higher vis-à-vis the British pound as the single currency tested offers around the ₤0.7970 level and was supported around the ₤0.7930 level.

CHF

The Swiss franc depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0335 level and was supported around the CHF 1.0275 level.  A UBS survey published today confirmed that Switzerland’s thriving manufacturing sector is only slowing gradually.  U.S. dollar bids are cited around the CHF 1.0250 level.  The euro moved higher vis-à-vis the Swiss franc as the single currency tested offers around the CHF 1.6235 level while the British pound weakened vis-à-vis the Swiss franc and tested bids around the CHF 2.0330 level.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.5707                 1.5761, 1.5689
USD/ JPY         107.26                 107.39, 106.69
GBP/ USD        1.9742                 1.9836, 1.9715
USD/ CHF         1.0329                 1.0336, 1.0275
AUD/ USD         0.9602                 0.9614, 0.9542
USD/CAD          1.0108                 1.0135, 1.0093
NZD/USD          0.7574                0.7617, 0.7539
EUR/ JPY         168.50    168.66, 167.81
EUR/ GBP        0.7955                 0.7965, 0.7932
EUR/ CHF         1.6223                 1.6235, 1.6178
GBP/ JPY         211.82                 212.14, 211.40
CHF/ JPY          103.85    104.00, 103.69

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.5225                          1.5645                            101.95                        106.60 

L2.        1.5035                          1.5840                            100.60                        109.95
L3.        1.4805                          1.6020                             98.75             113.30

   GBP/ USD                                                          USD/ CHF

L1.        1.9520                          1.9760                          1.0135                          1.0565

L2.        1.9395                          1.9880                          0.9990                          1.0730

L3.        1.9100                          2.0000                          0.9875                          1.1040

 AUD/ USD                                                           USD/ CAD

L1.        0.9380                          0.9655                          0.9870                          1.0175

L2.        0.9215                          0.9735                          0.9715                          1.0370

L3.        0.9005                          1.0115                          0.9465                          1.0520

 NZD/ USD                                                           EUR/ JPY

L1.        0.7700                          0.8105                          160.60                          166.65

L2.        0.7595                          0.8420                          158.35                          167.75

L3.        0.7275                          0.8665                          154.80                          168.95

  EUR/ GBP                                                           EUR/ CHF

L1.        0.7740                          0.8120                          1.5975                          1.6250

L2.        0.7555                          0.8310                          1.5855                          1.6470

L3.        0.7440                          0.8570                          1.5730                          1.6760

  GBP/ JPY                                                           CHF/ JPY

L1.        200.60                          208.50                            98.70                         103.30

L2.        197.55                          211.35                            97.00                         105.40

L3.        192.70                          217.15                            95.85                         107.70

SCHEDULE

Thursday, 10 July 2008

all times GMT

(last release in parentheses)

0000     NZ                    June PMI (49.3)

0100     Australia           July consumer inflation expectations (5.9%)

0130     Australia           June unemployment rate (4.3%)

0130     Australia           June employment change (-19,700)

0645     France              May industrial production (1.4% m/m)

0645     France              May industrial production (3.2% y/y)

0800     Italy                  May industrial production (2.0% y/y)

0800     Eurozone          July European Central Bank monthly report

1100     UK                    Bank of England interest rate decision (5.00%)

1230     US                    Weekly initial jobless claims (404,000)

1230     US                    Continuing jobless claims (3.116 million)

1400     US                    Federal Reserve Chairman Bernanke testifies

1400     US                    U.S. Treasury Secretary Paulson speaks

1930     US                    San Francisco Fed President Yellen speaks

Friday, 11 July 2008

all times GMT

(last release in parentheses)

0430     Japan                May industrial production (2.9% m/m)

0430     Japan                May industrial production (1.2% y/y)

0430     Japan                May capacity utilization (-0.7% m/m)

0430     Japan                June consumer confidence (34.1)

1100     Canada             June unemployment rate (6.1%)

1100     Canada             June employment, net change (8,400)

1230     US                    May trade balance (-US$ 60.9 billion)

1230     US                    June import price index (2.3% m/m)

1230     US                    June import price index (17.8% y/y)

1230     Canada             May international merchandise trade (C$ 5.1 billion)

1230     Canada             May new housing price index

1400     US                    July University of Michigan consumer sentiment (56.4)

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 used as investment advice. GCI assumes no responsibility or liability from gains or losses incurred by the information herein contained.

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