U.S. Forex Market Commentary

EURO

The euro moved higher vis-? -vis the U.S. dollartoday asthe single currency tested offers around the US$ 1.3625 level and was supportedaround the $1.3590 level. Technically,today??™s intraday low was right around the 38.2% retracement of the move from$1.3680 to $1.3535. A few factorscontributed to the pair??™s gains today. First, French presidential candidateSarkozy won the run-off election in France this weekend and even thoughhe was critical of the European Central Bank during his campaign, he was lesscritical than leftist candidate Royal. Much of the criticism that is periodically levied against the ECB originates in France and Sarkozy??™s conservativegovernment may change that dynamic. Second, Ecofin finance ministers reaffirmed the ECB??™s independencesaying it is ???an independent organ.??? Third, ECB President Trichet remained hawkish in comments saying ???Let's continue to befully aware about the risks. Pricestability is necessary for a global growth.??? The ECB convenes on Thursday andis not expected to tighten monetary policy until next month. Fourth, German March manufacturing ordersrose 2.4% m/m and 9.9% y/y. In U.S. news, most traders expect theFederal Open Market Committee will keep interest rates unchanged onWednesday. Friday??™s weaker-than-expectedU.S.April non-farm payrolls tally may play into the Fed??™s policy statement anddealers await any signal from the Fed that it is moving closer to a neutralpolicy bias. Euro bids are cited aroundthe US$ 1.3580 level.

JPN/CNY

The yen appreciatedvis-? -vis the U.S. dollar today asthe greenback tested bids around the ??119.75 level and was capped around the??120.20 level. Technically, today??™sintraday low was right around the 23.6% retracement of the move from ??117.60 to??120.45. Liquidity returned to normalfollowing last week??™s Golden Week holidays in Japanand China. Minutes from Bank of Japan??™s March PolicyBoard meeting were released overnight and some members indicated the centralbank must better communicate its intention to raise interest ratesgradually. Bank of Japan Governor Fukuiis scheduled to speak on Thursday and any indication from him that rates couldmove higher despite recent deflationary pressures may lead to further yenappreciation. The Nikkei 225 stock index gained 1.58% to close at??17,669.83. Dollar bids are cited aroundthe ??119.35 level. The euro gained marginal ground vis-? -vis the yen as the singlecurrency tested offers around the ??163.35 level and was supported around the??162.95 level. The British pound and Swiss franc moved marginally lower vis-? -visthe yen as the crosses tested bids around the ??239.15 and ??99.00 levels,respectively. In Chinese news, data released in China today saw May Day holidayretail sales climb 15.5% y/y.

STERLING

The British pound appreciated vis-? -vis the U.S. dollar today as cable tested offersaround the US$ 1.9975 level and was supported around the $1.9930 level. Technically, today??™s intraday low was rightaround the 38.2% retracement of the move from $1.9590 to $2.0130. A survey published by CBI today reported thatmanufacturing business confidence improved across all regions of the United Kingdomfor the first time since February 1995. Mosttraders expect Bank of England??™s Monetary Policy Committee to tighten interestrates by +25bps on Thursday. Cable bidsare cited around the US$ 1.9860 level. The euro gained marginal groundvis-? -vis the British pound as the single currency tested offers around the?‚¤0.6825 level and was supported around the ?‚¤0.6810 level.

SWISS

The Swissfranc appreciated vis-? -vis the U.S. dollar today as the greenback testedbids around the CHF 1.2080 level and was capped around the CHF 1.2110level. Today??™s range was limited onaccount of the bank holiday in the U.K.and pending interest rate decisions in the U.S.,eurozone, and U.K.this week. Traders await the release ofthe Swiss April unemployment rate. Dollar offers are cited around the CHF 1.2130 level. Theeuro and British pound lost marginal ground vis-? -vis the Swiss franc asthe crosses tested bids around the CHF 1.6440 and CHF 2.4110 levels,respectively.

AUD

The Australian dollar moved higher vis-? -vis theU.S. dollar today as the Aussie tested offers around the US$ 0.8260 level and wassupported around the $0.8205 level. Technically,today??™s intraday low was right around the 50% retracement of the move from$0.8030 to $0.8390. Data released in Australiaovernight saw April job advertisements climb 3.5% m/m and 27.1% y/y while theApril NAB business confidence index rose to +13 from +10 in March. Australian dollar bids are cited around theUS$ 0.8165 level.

CAD

The Canadian dollar appreciated vis-? -vis the U.S.dollar todayas the greenback tested bids around the C$ 1.1005 level and was capped aroundthe $1.1075 level. Today??™s intraday lowwas the pair??™s weakest print since 13 June 2006. April housing starts data will be releasedtomorrow. U.S. dollar offers are citedaround the C$ 1.1150 level.