Daily Forex Commentary 10/8/2010

:: Australian Dollar: A larger than forecast 3.9% decline in Australian home loans during June and disappointing ANZ job advertisements data halted the progress of the Aussie dollar in Asia yesterday as it entered offshore exchange relatively unchanged from the weeks open at 0.9185. Better than expected European data saw the Greenback weaken in early London trade taking the AUD/USD back above the 92 cent handle however the move proved to be temporary as investors pared back short USD positions ahead of this evenings FOMC meeting. This morning sees the local unit open near its overnight lows at 0.9160 ahead of today's NAB Business Confidence survey and the Bank of Japan meeting with investors keeping a close eye on developments in the USD/JPY for more direction on the Greenback and currency markets in general during the Asian session.

- We expect a range today in the AUD/USD rate of 0.9120 to 0.9220

:: Great Britain Pound: Direction for the Pound Sterling during overnight trade came from better than expected German data and movement in the Greenback. The Cable initially traded higher on the back of an early London rally in EUR/USD however resistance ahead of the 1.6 level capped any further advances for the second time since Friday night's attempt to break through this level. This morning sees the Pound open back at 1.5900 against the Greenback with important data releases out of the UK during the second half of this week and central bank meetings in Japan and the U.S today to determine whether or not the GBP can break above the psychological 1.6 level. Against the Aussie dollar it opens at 1.7350 after having traded in an overnight range between 1.7320 and 1.7430.

- We expect a range today in the GBP/AUD rate of 1.7300 to 1.7450

:: New Zealand Dollar: After opening the weeks trade on its highs around 0.7330 yesterday the Kiwi drifted lower to exchange at an overnight low of 0.7270 against the Greenback and opens this morning at 0.7285. With only second tier N.Z data releases early in the week the NZD/USD fortunes in the near term rest heavily on developments in the U.S as markets remain on tenterhooks ahead of this evenings Federal Reserve Bank meeting. The Greenback has weakened considerably in recent weeks as economic data in North America continues to print below forecasts and the expectations building that the central bank will need to embark on quantitative easing in order to spur demand. The big dollar has fallen against most majors with the NZD being one of the beneficiaries of the move. There are some risks for the Kiwi on the horizon however with the possibility of a correction to the USD weakness later in the week as Retail Sales, Inflation and Consumer Sentiment data out of North America is released.

- We expect a range today in the NZD/USD rate of 0.7225 to 0.7325

:: Majors: After threatening to break below the 85 level and trade to 15 year lows on Friday night the USD/JPY staged a recovery on Monday to open this morning on its highs at 85.90. Comments from the Japanese Finance Minister Noda who warned against the economic impact of a strong yen coupled with the release of a lower than expected trade balance out of Japan weakened the JPY ahead of today's BOJ meeting. Although the central bank is not expected to move on interest rates the market will be eyeing the ensuing press conference for more rhetoric surrounding "undesirable" exchange rate fluctuations and the possibility of intervention at some point. In Asia today the USD/JPY is likely to continue to squeeze higher as speculators square up short USD/JPY positions heading into this evenings much anticipated U.S Federal Reserve Bank meeting. The likelihood of an announcement of any quantitative easing has diminished somewhat however it is likely that the Fed will announce some downward revisions to GDP and deliver a more sombre assessment of the economy which could be enough to cap any further attempts at a rally in the USD/JPY between 86.50 and 87.00 over the next 24 hours. The big dollar also opens higher at 1.3225 against the Euro bouncing back after dropping to 1.3308 following the announcement of an improvement in the German Trade Balance and the Sentix Investor Confidence survey.

:: Data Releases: