DAILY MARKET COMMENTARY
23 September 2008

Tuesday

_____________________________________________________________________
GCI Foreign Exchange Research:        www.gcitrading.com/fxnews/
FX Research Desk:                                fxnews@gcitrading.com
_____________________________________________________________________

Fundamental Outlook at 1400 GMT (EDT + 0400)

€

The euro moved lower vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.4680 level and was capped around the $1.4825 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from $1.2475 to $1.6040.  Traders are awaiting details from testimony from Federal Reserve Chairman Bernanke and Treasury Secretary Paulson before the Senate Banking Commission.  Many dealers are pessimistic about the U.S. government’s plan to transfer US$ 700 billion in toxic assets from banks’ balance sheets and believe it could require more than US$ 1 trillion to recapitalize the U.S. financial system.  Others are asking what would happen if the government bailout fails to achieve its desired results.  Bernanke’s prepared remarks will report “financial markets remain under extraordinary stress” while Paulson will call for “further, decisive action to fundamentally and comprehensively address the root cause of this turmoil.” The government will need to adopt legislation enabling it to hold illiquid mortgage-backed securities that have made it difficult for financial institutions to issue new asset-backed commercial paper.  The Fed approved the applications of Goldman Sachs and Morgan Stanley to become bank holding companies.  Data released in the U.S. today saw the Richmond Fed’s September manufacturing index worsen to -18 from -16 in August while the July house price index fell 0.6%. In eurozone news, the EMU-15 PMI survey fell to 47.0 in September from 48.2 in August, its lowest reading since November 2001. Also, EMU-15 July industrial orders were up 1.0% m/m.  European Central Bank’s Kranjec cited a “slowing down of activity” while ECB’s Provopoulos cited a “slowing economy and higher inflation.”  Additionally, ECB’s Liikanen said financial markets are the “biggest risk to growth” while ECB’s Gonzalez-Paramo said the central bank is dissatisfied with current inflation.  ECB President Trichet said the financial market correction is an “ongoing process.”  The ECB will likely be displeased with reports that Germany’s IG Metall union is seeking an 8% wage hike.  Euro bids are cited around the US$ 1.3840 level.

¥/ CNY

The yen depreciated vis-à-vis the U.S. dollar today as the greenback tested offers around the ¥106.00 figure and was supported around the ¥105.15 level.  Liquidity was reduced on account of a market holiday in Japan.  Three-month implied options volatility for dollar/yen rose to 14.25%, nearing the six-month peak of 14.80% reached last Friday.  This suggests the spot rate may trade in wider ranges through early 2009.    On the political front, former Taro Aso is expected to be formally named the next Prime Minister of Japan tonight and he may name former trade minister Nakagawa as the next finance minister, replacing current finance minister Ibuki.  The Nikkei 225 stock index will reopen overnight. U.S. dollar bids are cited around the ¥102.45 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥155.20 level and was capped around the ¥156.30 level.  The British pound gained ground vis-à-vis the yen as sterling tested offers around the ¥196.40 level while the Swiss franc weakened vis-à-vis the yen and tested bids around the ¥97.45 level.  The Chinese yuan appreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8135 in the over-the-counter market, down from CNY 6.8300. 

₤

The British pound appreciated vis-à-vis the U.S. dollar today as cable tested offers around the US$ 1.8635 level and was supported around the $1.8485 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from $2.0155 to $1.7440 level.  Data released in the U.K. today saw BBA August mortgage approvals fall to a record low.  CBI’s retail sales survey will be released tomorrow.   Cable bids are cited around the $1.7605 level.  The euro came off vis-à-vis the British pound as the single currency tested bids around the ₤0.7930 level and was capped around the ₤0.7980 level.

CHF

The Swiss franc slumped vis-à-vis the U.S. dollar today as the greenback tested offers around the CHF 1.0855 level and was supported around the CHF 1.0725 level.  Technically, today’s intraday low was right around the 38.2% retracement of the move from CHF 1.2465 to CHF 0.9645.  Swiss National Bank allotted US$ 10 billion in repo to provide U.S. dollar liquidity to the markets.  U.S. dollar offers are cited around the CHF 1.1430 level.  The euro and British pound gained ground vis-à-vis the Swiss franc as the crosses tested offers around the CHF 1.5960 and CHF 2.0100 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.4722                 1.4824, 1.4679
USD/ JPY         105.72                 105.92, 105.15
GBP/ USD        1.8516                 1.8633, 1.8484
USD/ CHF         1.0825                 1.0856, 1.0723
AUD/ USD         0.8434    0.8467, 0.8355
USD/CAD          1.0312                 1.0370, 1.0304
NZD/USD          0.6904                0.6920, 0.6854
EUR/ JPY         156.02    156.28, 155.20
EUR/ GBP        0.7952                 0.7978, 0.7929
GBP/ JPY         196.22                 196.39, 194.91
CHF/ JPY            97.81      98.31,   97.43

Support                        Resistance                   Support                     Resistance

EUR/ USD                                                              USD/ JPY

L1.        1.3840                          1.4975                            106.60                        113.30 

L2.        1.3320                          1.5175                            102.45                        115.90
L3.        1.2675                          1.5380                            101.95                        117.45

   GBP/ USD                                                          USD/ CHF

L1.        1.7420                          1.9135                          1.0705                          1.1475

L2.        1.6450                          1.9525                          1.0505                          1.1610

L3.        1.5445                          1.9835                          1.0340                          1.1910

 AUD/ USD                                                           USD/ CAD

L1.        0.8095                          0.8885                          1.0440                          1.0940

L2.        0.7910                          0.9220                          1.0130                          1.1205

L3.        0.7685                          0.9370                          0.9720                          1.1870

 NZD/ USD                                                           EUR/ JPY

L1.        0.6590                          0.7275                          153.00                          164.35

L2.        0.6440                          0.7520                          153.30                          165.40

L3.        0.5930                          0.8105                          145.65                          167.80

  EUR/ GBP                                                           EUR/ CHF

L1.        0.7730                          0.8310                          1.5895                          1.6250

L2.        0.7555                          0.8570                          1.5730                          1.6470

L3.        0.7440                          0.8790                          1.5610                          1.6760

  GBP/ JPY                                                           CHF/ JPY

L1.        188.55                          200.50                            94.15                         100.15

L2.        181.15                          206.00                            91.30                         103.30

L3.        173.75                          214.65                            87.40                         105.30

SCHEDULE

Tuesday, 23 September 2008

all times GMT

(last release in parentheses)

0200     NZ                    Q3 Westpac consumer confidence (81.7)

0645     France              August consumer spending (-0.4% m/m)

0645     France              August consumer spending (1.0% y/y)

0730     Italy                  September consumer confidence

0830     UK                    August BBA house purchase loans

0900     Eurozone          July industrial new orders (-0.3% m/m)

0900     Eurozone          July industrial new orders (-7.4% y/y)

1100     Canada             August consumer price index (0.3% m/m)

1100     Canada             August consumer price index (3.4% y/y)

1100     Canada             Bank of Canada CPI, core (0.1% m/m)

1100     Canada             Bank of Canada CPI, core (1.5% y/y)

1400     US                    September Richmond Fed manufacturing index (-16)

1400     US                    July house price index (0.0% m/m)

2350     Japan                Q3 BSI large all industry (-15.2)

2350     Japan                Q3 BSI large manufacturing (-15.1)

Wednesday, 24 September 2008

all times GMT

(last release in parentheses)

N/A       Australia           September DEWR skilled vacancies (-1.7% m/m)

N/A       Japan                September PMI, manufacturing (46.9)

N/A       Germany           September consumer price index

0645     France              September business confidence indicator (98)

0730     Italy                  September business confidence

0800     Germany           September Ifo, expectations (87.0)

0800     Germany           September Ifo, business climate (94.8)

0800     Germany           September Ifo, current assessment (103.2)

0800     Eurozone          July current account (-€8.2 billion)

0800     Italy                  July retail sales (-0.5% m/m)

0800     Italy                  July retail sales (-3.4% y/y)

1100     US                    MBA mortgage applications

1400     US                    August existing home sales (5.00 million)

1400     US                    August existing home sales (3.1% m/m)

2350     Japan                August merchandise trade balance

2350     Japan                August corporate service prices (1.3% y/y)

Thursday, 25 September 2008

all times GMT

(last release in parentheses)

N/A       Australia           Reserve Bank of Australia Financial Stability Review

N/A       Australia           August HIA new home sales (-7.2% m/m)

N/A       Germany           October GfK consumer confidence (1.5)

N/A       UK                    September Nationwide house prices (-1.9% m/m)

N/A       UK                    September Nationwide house prices (-10.5% y/y)

0800     Eurozone          August M3 money supply (9.6%)

0800     Italy                  July trade balance

1230     US                    August durable goods orders (1.3%)

1230     US                    August durable goods orders, ex-transportation (0.7%)

1230     US                    Weekly initial jobless claims

1230     US                    Continuing jobless claims

1400     US                    August new home sales (515,000)

1400     US                    August new home sales (2.4% m/m)

1440     US                    Chicago Fed President Evans speaks

1700     US                    Federal Reserve Governor Warsh speaks

2245     NZ                    Q2 GDP (-0.3% q/q)

2245     NZ                    Q2 GDP (1.9% y/y)

2330     Japan                September Tokyo CPI (1.3% y/y)

2330     Japan                September Tokyo CPI, ex-food, energy (0.2% y/y)

2330     Japan                August CPI (2.3% y/y)

2330     Japan                August CPI (0.2% y/y)

2330     US                    Dallas Federal Reserve President Fisher speaks

2350     Japan                Foreign purchases of Japanese equities and bonds

2350     Japan                U.S. purchases of foreign equities and bonds

Friday, 26 September 2008

all times GMT

(last release in parentheses)

0645     France              Q2 GDP (-0.3% q/q)

0645     France              Q2 GDP (1.1% y/y)

0645     France              September consumer confidence

0800     Italy                  August hourly wages

0930     CH                    September leading indicator (0.68)

1230     US                    Q2 GDP, annualized (3.3% q/q)

1230     US                    Q2 personal consumption expenditure (2.1% q/q)

1400     US                    September University of Michigan consumer sentiment

1400     US                    St. Louis Federal Reserve Bank President Bullard speaks

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.