WEEKLY MARKET RECAP, WEEK AHEAD, AND SCHEDULE
1 October 2006

Sunday







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€



The euro depreciated vis-à -vis the U.S. dollar last week as the single currency tested bids around the $1.2640 level and was capped around the $1.2815 level. The pair lost about 115 pips last week. The possibility of additional FOMC tightening was kept alive by August core PCE inflation that printed at +2.5% y/y, more-than-expected – the strongest showing since April 1995. Philly Fed President Plosser intimated it is premature to conclude inflation is on the way down on account of the recent pullback in oil while Kansas City Fed’s Hoenig said the U.S. economic outlook is “slowing” ahead of the fourth quarter. Some traders are speculating the Fed may actually cut interest rates in December. August personal spending came in at +0.1%; the final September University of Michigan consumer sentiment index printed at 85.4; and the Chicago PMI survey reached a lofty 62.1. Additionally, August durable goods orders for new goods were off 0.5% m/m while August new home sales rose 4.1% but were off 17.4% y/y. Moreover, weekly initial jobless claims receded 6,000 to 316,000; revised Q2 GDP decelerated from to +2.6% from the initial estimate of +2.9%; existing home sales fell 0.5%; and the core PCE index improved a revised 2.7%.



In eurozone news, the headline German Ifo survey printed at 104.9, down from 105.0 in August while the expectations sub-index weakened to 98.9. German August import prices rallied 0.2% m/m and 5.5% y/y while the EMU-12 M3 money supply expanded 8.2% y/y. Germany’s October GfK consumer climate index improved to 8.8; September HICP fell to +1.8% from August’s +2.3% level; German August retail sales were up 1.0% y/y; the EMU-12 September economic indicator improved to 109.3; French August PPI was up 0.2% m/m; Germany’s jobless number fell 26,000; and German August wholesale sales were off 0.2% m/m and were up 1.9% y/y. ECB’s Weber and Garganas set the stage for additional ECB tightening in their remarks. Traders still expect two ECB rate hikes by the end of the year.



Technical Outlook









Last week’s high (1) was above the 61.8% retracement of the 1.3480-1.1638 range and last week’s low (2) was just below the 50.0% retracement of the 1.3666-1.1638 range. The 1.2776/ 1.2891/ 1.2979/ 1.3045/ 1.3187/ 1.3480 levels represent upside resistance targets while the 1.2652/ 1.2559/ 1.2413/ 1.2342/ 1.2117 levels represent downside support targets.





Â¥/ CNY



The yen depreciated vis-à -vis the U.S. dollar last week as the greenback tested offers around the ¥118.15 level and was supported around the ¥116.10 level. The pair gained about 155 pips last week. The Nikkei 225 stock index closed the week at ¥16,127.58. Shinzo Abe took over as the new Prime Minister from Koizumi and pledged to restore better ties with China and Korea ; some traders are concerned Abe may backtrack on Koizumi’s economic reforms. New finance minister Omi and his deputy Fujii reported the yen’s decline has been “a bit rough.” August corporate services prices rose 0.3% y/y, the first increase in more than eight years; August core consumer prices gained 0.3% y/y; the August unemployment rate was unchanged at +4.1% y/y; August industrial output improved 1.9% m/m; August household spending tanked 4.3% y/y; August housing starts gained 1.8% y/y; and August retail sales expanded 1.3% y/y.



The Chinese yuan appreciated vis-à -vis the U.S. dollar last week as the greenback closed at CNY 7.9041 in the over-the-counter market, down from CNY 7.9195, and at CNY 7.9079 in the exchange-traded market. PBOC predicted 2006 GDP and inflation will come in at 10.5% and 1.5%, respectively. PBOC’s Fan Gang predicted China ’s FX reserves will reach US$ 1 trillion shortly.



Technical Outlook











Last week’s high (1) was just below the 76.4% retracement of the 121.39-108.98 range and last week’s low (2) was right at the 23.6% retracement of the 108.98-118.28 range. Upside resistance targets remain the 118.46/ 119.39/ 121.39 levels while downside support targets remain the 115.19/ 113.42/ 112.38/ 111.91/ 111.08/ 109.57 levels.



₤



The British pound depreciated vis-à -vis the U.S. dollar last week as cable tested bids around the US$ 1.8630 level and was capped around the $1.9070 level. The pair lost about 285 pips last week. Q2 GDP growth was downwardly revised to +0.7% q/q and most traders expect BoE’s MPC to hold their fire this week. MPC’s Blanchflower predicted growth and inflation will come in weaker-than-expected while MPC’s Gieve noted he considered voting for a rate hike in September. BBA August net mortgage lending rose ₤6.2 billion; the Q2 current account deficit narrowed to -₤7.0 billion; the CBI distributive trades survey saw retail sales improve at their fastest pace in nearly two years; Q2 business investment expanded 1.6% q/q; Nationwide September house prices climbed 1.3% m/m; July services output was off 0.3% m/m; and the September GfK consumer confidence index rose one index point to -7.



Technical Outlook









Last week’s high (1) was above the 76.4% retracement of the 1.9549-1.7054 range and last week’s low (2) was right at the 61.8% retracement of the same range. Upside resistance targets include the 1.8966/ 1.9144/ 1.9217/ 1.9323/ 1.9549 levels while downside support targets include the 1.8601/ 1.8343/ 1.8279/ 1.8010 levels.



CHF



The Swiss franc depreciated vis-Ã -vis the U.S. dollar last week as the greenback tested offers around the CHF 1.25650 level and was supported around the CHF 1.2290 level. The pair gained about 145 pips last week. The August UBS consumption indicator fell slightly to 1.71 from 1.88 in July and the September KOF economic barometer fell to 2.32.



Technical Outlook











Last week’s high (1) was below the 50.0% retracement of the 1.3285-1.1920 range and last week’s low (2) was right at the 50.0% retracement of the 1.1285-1.3285. Upside resistance targets include the 1.2603/ 1.2778/ 1.3129 levels while downside support targets include 1.2441/ 1.2286/ 1.2050/ 1.1990/ 1.1758/ 1.1481 levels.



CAD



The Canadian dollar appreciated marginally vis-Ã -vis the U.S. dollar last week as the greenback tested bids around the US$ 1.1085 level and was capped around the US$ 1.1190 level. The pair lost about five pips last week. July GDP expanded +0.2% q/q in Q2, consistent with expectations.





Technical Outlook











Last week’s high (1) was just above the 23.6% retracement of the 1.1975-1.0927 range and last week’s low (2) was below the 23.6% retracement of the same range. Upside resistance targets include the 1.1353/ 1.1457/ 1.1521/ 1.1617 levels while downside support targets include the 1.1028/ 1.0927 levels.





AUD



The Australian dollar depreciated vis-Ã -vis the U.S. dollar last week as the Aussie tested bids around the US$ 0.7435 level and was capped around the US$ 0.7555 level. The pair lost about 45 pips last week. August private sector credit growth was up +0.9% m/m and 14.4% y/y; job vacancies were off 0.8% in the three months to August; RBA reported household balance sheets are in decent shape; and the Australian government predicted earnings from commodity exports are expected to climb 14% to A$ 140.2 billion in the year to June 2007.



Technical Outlook









Last week’s high (1) was below the 61.8% retracement of the 0.7986-0.7015 range and last week’s low (2) was below the 50.0% retracement of the same range. Upside resistance targets include the 0.7501/ 0.7615/ 0.7711/ 0.7840/ 0.7986 levels while downside support targets include the 0.7403/ 0.7312/ 0.7244 / 0.7198 levels.





SCHEDULE



Sunday, 1 October 2006

all times GMT

(last release in parentheses)



2350 Japan Q3 tankan, large manufacturers’ index (21)

2350 Japan Q3 tankan, large manufacturers’ outlook (22)

2350 Japan Q3 tankan, large manufacturers (20)

2350 Japan Q3 tankan, non-manufacturers’ outlook (21)

2350 Japan Q3 tankan, all-industries capital expenditures (11.6%)



Monday, 2 October 2006

all times GMT

(last release in parentheses)



0130 Japan August labour cash earnings (0.4 y/y)

0130 Japan August overtime earnings (2.3% y/y)

0545 CH September SECO 2006 economic forecasts

0730 CH September Purchasing Managers Index (68.2)

0745 Italy September PMI, manufacturing (54.

0750 France September PMI, manufacturing (56.2)

0755 Germany September PMI, manufacturing (58.2)

0800 Eurozone September PMI, manufacturing (56.5)

0800 Italy July large company employment (-0.2% y/y)

0830 UK September PMI, manufacturing (53.1)

1400 US August construction spending (-1.2% m/m)

1400 US September ISM manufacturing (54.5)

1400 US September ISM, prices paid (73.0)

2330 Australia September AIG performance of manufacturing index (52.1)

2350 Japan September monetary base (-20.2% y/y)



Tuesday, 3 October 2006

all times GMT

(last release in parentheses)



0130 Australia August retail sales (0.6%)

0130 Australia August building approvals (8.3% m/m)

0130 Australia August building approvals (9.1% y/y)

0545 CH September consumer price index (0.2% m/m)

0545 CH September consumer price index (1.5% y/y)

0830 UK September PMI, construction (54.5)

0830 UK Q2 mortgage equity withdrawal (₤12.509 billion)

0900 Eurozone August unemployment rate (7.8%)

0900 Eurozone August producer price index (0.6% m/m)

0900 Eurozone August producer price index (5.9% y/y)

1200 NZ September ANZ commodity prices (0.4%)

2301 UK September Nationwide consumer confidence (83.0)

2330 Australia Reserve Bank of Australia interest rate decision



Wednesday, 4 October 2006

all times GMT

(last release in parentheses)



N/A UK Bank of England Monetary Policy Committee meeting begins

0145 US Kansas City Fed President Hoenig speaks

0400 Australia August trade balance (-A$ 588 million)

0700 Eurozone European Central Bank President Trichet speaks

0745 Italy September PMI, services (57.6)

0750 France September PMI, services (61.3)

0755 Germany September PMI, services (54.3)

0800 Eurozone September PMI, services (57.1)

0830 UK September PMI, services (56.7)

0900 Eurozone August retail sales (0.6% m/m)

0900 Eurozone August retail sales (2.5% y/y)

0930 UK September BRC shop price index

1100 US September MBA mortgage applications (-4.9%)

1215 US September ADP employment change (107,000)

1400 US September ISM non-manufacturing (57.0)

1400 US August factory orders (-0.6%)

1600 US New York Fed President Geithner speaks

1645 US Federal Reserve Chairman Bernanke speaks

2330 Australia September AIG performance of service index (50.2)

2330 US Fed Governor Kohn speaks



Thursday, 5 October 2006

all times GMT

(last release in parentheses)



N/A Australia September Cashcard retail index

0130 Australia Q3 NAB business survey

0130 Japan Bank of Japan Deputy Governor Muto speaks

0800 France September PMI, retail (55.1)

0800 Germany September PMI, retail (52.1)

0800 Italy September PMI, retail (48.7)

0800 Eurozone September PMI, retail (52.3)

1100 UK Bank of England Monetary Policy Committee interest rate decision

1145 Eurozone European Central Bank President Trichet speaks

1230 US Weekly initial jobless claims (316,000)

1230 US Continuing jobless claims (2.444 million)

1230 Canada August building permits (-2.3% m/m)

1400 Canada September Ivey PMI (55.7)

1440 US Chicago Fed President Moskow speaks

1600 US Philadelphia Fed President Plosser speaks

2350 Japan Official reserve assets (Â¥878.7 billion)



Friday, 6 October 2006

all times GMT

(last release in parentheses)



0500 Japan August coincident index (75%)

0500 Japan August leading economic index (27.3%)

0545 CH September unemployment rate (3.1%)

0830 UK August industrial production (0.2% m/m)

0830 UK August industrial production (0.4% y/y)

0830 UK August manufacturing production (0.2% m/m)

0830 UK August manufacturing production (1.0% y/y)

1000 Germany August factory orders (1.8% m/m)

1000 Germany August factory orders (7.5% y/y)

1100 Canada September unemployment rate (6.5%)

1100 Canada September employment, net change (-16,000)

1230 US September non-farm payrolls, net change (128,000)

1230 US September unemployment rate (4.7%)

1230 US September average hourly earnings (0.1% m/m)

1230 US September average hourly earnings (3.9% y/y)

1230 US September average weekly hours (33.

1900 US August consumer credit

2301 UK September NIESR GDP, estimate (0.8%)

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