Daily Forex Commentary 28/9/2010

:: Australian Dollar: In an otherwise quiet session yesterday the Australian dollar managed to once again touch fresh 26-month highs. After losing some steam during Asian trade and falling back below 96 cents the AUD found solid support at 0.9575, however the lack of any local economic data ensured upward momentum remained sluggish. Entering offshore trade around 0.9590 it wasn't long before the currency found some fuel for a rally and continued its bullish trend towards key resistance levels around 0.9650-0.9670, though stalling around 0.9640. After some profit-taking sends the currency pair back down towards 0.9600 we open today currently trading at 0.9610. Today is once again void of any expected local data releases, with markets instead looking towards the North American session this evening where US Consumer Confidence is expected to post a slight fall from 53.5 to 52.5 and the Federal Reserve Governor Kevin Warsh is due to participate in a panel on job creation.

- We expect a range today in the AUD/USD rate of 0.9550 to 0.9650

:: Great Britain Pound: The Asian session saw rather lacklustre trade in the Cable yesterday with the pair content to trade within a 40-pip range, though holding recent gains above 1.5800. Entering London around 1.5830, Sterling soon took a tumble from its recent range to test support at 1.5790. Investors remain concerned about the outlook for the UK's recovery however recent words from the IMF provided some support for the country's fiscal/monetary policies stating they welcomed the country's fiscal tightening measures however they were likely to result in moderate growth, warning consumer demand could take a hit. The IMF forecast a much more moderate growth of 2.0% compared to the Bank of England's 2.9%. It appears the market appreciated a slow and steady mantra for the UK recovery as the Pound forged back through 1.5800 to reach highs around 1.5865. We open today slightly lower at 1.5820 with the upcoming London session likely to experience some event risk as the release of the UK Current Account balance, final GDP figures and Realised Sales figures are all due.

- We expect a range today in the GBP/AUD rate of 1.6425 to 1.6525

:: New Zealand Dollar: After starting the week higher on Monday the New Zealand Dollar has valiantly fought to hold onto these gains after initially falling back to Friday levels, finding support at 0.7325 against the Greenback. Ending Asian trade near support levels the Kiwi managed to find some momentum early in London hours to retrace its steps back to opening levels and test resistance at 0.7365. Also opening lower this morning, the NZD continues to feel the weight of the country's economic woes and with no local data releases expected today, focus will be on tomorrow's Trade Balance which is expected to increase from -186M to -74M.

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

:: Majors: Japanese Trade Balance data released yesterday highlighted the impact a strong Yen is having on the real economy with exports growing at the slowest pace this year. The news caused a brief spike in USD/JPY to 84.35 during local trade with investors somewhat nervous about the prospects of more currency intervention aimed at weakening the Yen. The move was short lived however and it drifted lower to retest 84.10 in a quiet overnight session and opens this morning in Asia at 84.25. In other news ECB President Trichet spoke in Brussels overnight signalling to the market that the central bank's current monetary policy stance is "accommodative" and "appropriate" given the outlook for inflation which "could increase slightly in the short term but should remain moderate over the policy-relevant horizon"; a clear sign that interest rates will remain at record lows of 1% for some time still. The recent rally in EUR/USD seems to be stalling with resistance around the 1.3500 handle capping any further advances for the time being opening this morning at 1.3455.

:: Data Releases: