DAILY MARKET COMMENTARY
10 October 2008

Friday

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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 fell sharply vis-à-vis the U.S. dollar today as the single currency tested bids around the US$ 1.3465 level and was capped around the $1.3650 level.  NYMEX crude oil futures for November delivery were off more than 7% and this led to a pullback in the euro. Also, U.S. interbank lending rates remain significantly elevated and they are also keeping the U.S. dollar bid.  Data released in the U.S. today saw the August trade gap fall 3.5% to US$ 59.1 billion and September import prices were off 3.0%, the largest decline in five years.  Group of Seven officials are convening in Washington, D.C. this weekend and traders should expect some strong language in their communiqué that can roil the markets at the Monday open.  Eurogroup chairman Juncker declined comment on a suggestion the G7 should guarantee interbank lending.  There are reports the Fed and Treasury will meet to discuss the terms under which the U.S. government may purchase equity in U.S. banks. Wall Street Journal had a separate report that the U.S. government may temporarily insure all U.S. bank deposits.  Euro bids are cited around the US$ 1.3320 level.

¥/ CNY

The yen appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the ¥97.90 level and was capped around the ¥100.45 level.  Minutes from a recent Bank of Japan Policy Board meeting indicated slower economic growth is expected.  Finance minister Nakagawa ordered the government to identify steps to strengthen Japanese financial institutions.  Data released in Japan overnight saw the September M3 money supply up 0.9% y/y while September outstanding bank loans were up 1.6% y/y.  Nikkei reported Japan will propose an International Monetary Fund scheme whereby countries’ foreign reserves can be used to finance emergency loans to emerging countries. Japanese markets will be closed on Monday for a national holiday.  The Nikkei 225 stock index lost 9.62% to close at ¥8,276.43.  U.S. dollar offers are cited around the ¥104.15 level.  The euro moved lower vis-à-vis the yen as the single currency tested bids around the ¥132.80 level and was capped around the ¥136.35 level. The British pound moved lower vis-à-vis the yen as the crosses tested bids around the ¥165.90 level while the Swiss franc gained ground vis-à-vis the yen and tested offers around the ¥89.65 level. The Chinese yuan depreciated vis-à-vis the U.S. dollar as the greenback closed at CNY 6.8357 in the over-the-counter market, up from CNY 6.8205.  The government reported 2008 GDP growth may slow to 10.1% with CPI up 6.5%.  People’s Bank of China called for “flexible macroeconomic policies.”

₤

The British pound depreciated vis-à-vis the U.S. dollar today as cable tested bids around the US$ 1.6790 level and was capped around the $1.7180 level.  Prime Minister Brown’s government is receiving some high markets from other countries regarding its decision to offer hundreds of billions in guarantees to encourage banks to start lending to each other and save the banking system. Cable bids are cited around the $1.6635 level. The euro moved lower vis-à-vis the British pound as the single currency tested bids around the ₤0.7895 level and was capped around the ₤0.8070 level.

CHF

The Swiss franc appreciated vis-à-vis the U.S. dollar today as the greenback tested bids around the CHF 1.1125 level and was capped around the CHF 1.1315 level.  Data released in Switzerland today saw September unemployment remain stable at 2.4%.  The Swiss finance ministry called for higher guarantees for savers’ deposits.  U.S. dollar offers are cited around the CHF 1.1800 figure.  The euro and British pound came off vis-à-vis the Swiss franc as the crosses tested bids around the CHF 1.5075 and CHF 1.8855 levels, respectively.

Technical Outlook at 1230 GMT (EDT + 0400)

             (Bid Price)       (Today’s Intraday Range)                               

EUR/ USD         1.3592                 1.3652, 1.3493
USD/ JPY         100.01                 100.44,   97.89
GBP/ USD        1.7113                 1.7178, 1.6788
USD/ CHF         1.1174                 1.1313, 1.1127
AUD/ USD         0.6690    0.6883, 0.6521
USD/CAD          1.1758                 1.1829, 1.1446
NZD/USD          0.6009                0.6071, 0.5889
EUR/ JPY         136.10    136.34, 132.78
EUR/ GBP        0.7928                 0.8068, 0.7909
GBP/ JPY         171.28                 171.96, 165.91
CHF/ JPY            89.40      89.65,   86.53

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

Friday, 10 October 2008

all times GMT

(last release in parentheses)

0545     CH                    September unemployment rate (2.4%)

0645     France              August industrial production (1.2% m/m)

0645     France              August industrial production (-2.0% y/y)

0645     France              August manufacturing production (1.5% m/m)

0645     France              August manufacturing production (-2.3% y/y)

0800     Italy                  August industrial production

1100     Canada             September unemployment rate (6.1%)

1100     Canada             September employment, net change (15,200)

1230     US                    August trade balance (-US$ 62.2 billion)

1230     US                    September import price index (-3.7% m/m)

1230     US                    September import price index (16.0% y/y)

1230     Canada             August international merchandise trade

1230     Canada             August new housing price index (0.1% m/m)

1400     Canada             Q3 business outlook survey

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.