Daily Forex Commentary 23/9/2010

:: Australian Dollar: The AUD traded solidly throughout Asia yesterday consolidating stoically above 0.9550 for most of the day. The Greenback remained under pressure during the European session as the Bank of England joined the FOMC in the view further stimulus measures may be required and this aided the Australian dollar to test new resistance just below 96 cents. These levels were seen only briefly as it was announced U.S house prices dropped 0.5% from June (3.3% YoY), and AUD/USD quickly retraced all Asian gains to test support levels near 0.9510. Bouncing back, we start the day trading once again around 0.9550 and with no local data due for release we may be looking at a familiar range today.

- We expect a range today in the AUD/USD rate of 0.9525 to 0.9595

:: Great Britain Pound: The Pound benefited from an increase in risk appetite on Wednesday, rallying steadily towards 1.57 and entering London on a 3-day high. Following the release of the BOE's minutes, Sterling took a hit and tumbled to 1.5604, and after some choppy trade recovered to hold around 1.5650. With Andrew Sentance remaining the one lone hawk amongst a much more cautious Monetary Policy Committee, the currency is likely to remain weighed down against its major counterparts. The Pound begins the Asian session lower against the antipodean currencies, trading against the Aussie at 1.6380 and the Kiwi at 2.1210.

- We expect a range today in the GBP/AUD rate of 1.6350 to 1.6400

:: New Zealand Dollar: After several failed attempts the Kiwi finally took out stubborn resistance at 0.7350 to momentarily exchange above the 74 cent handle for the first time since January this year. Global investors ignored a turnaround in the Current Account balance during the second quarter of the year which moved from a surplus into deficit focusing instead on news in Europe and the U.S. This morning sees the NZD/USD open at 0.7385 ahead of the release of Q2 GDP data with economic growth in N.Z expected to have increased from 0.6% to 0.8%. Despite the increase analysts are somewhat less optimistic for third quarter growth so should a rally result from higher than expected numbers today the move is likely to be short lived during the Asian session.

- We expect a range today in the NZD/USD rate of 0.7350 to 0.7400

:: Majors: The recent rally in the Euro continued overnight pushing through August 6 highs of 1.3330 against the Greenback to trade above the 1.34 handle for the first time since April. Hot on the heels of the successful Irish bond auction the previous day demand for Portuguese bonds was 3.5 times oversubscribed as investors scrambled to purchase some of the 750 million EUR on offer at a yield of 4.7%. With the big dollar already on the back foot a 0.5% decline in the July House Price index kept a lid on any attempts at a recovery against the Euro and Yen. USD/JPY gave back the majority of the gains that followed Japanese currency intervention dropping back below 85 to an eventual overnight low around 84.25. Trading in Asia today is likely to be relatively subdued with both China and Japan having bank holidays before this evenings U.S weekly jobless claims which will give investors some further guidance as to the state of the North American employment market.

:: Data Releases: