Daily Forex Commentary 7/9/2010

:: Australian Dollar: The Aussie dollar traded sideways since the commencement of the week's trade bouncing between 0.9145 and 0.9175 for the majority of Monday's Asian session and last night's offshore trade. A weaker Euro halted any attempts to retest the 92 cent handle in London exchange overnight sending the AUD to 0.9150, and with the U.S markets closed for the Labour Day holiday the AUD/USD opens this morning relatively unchanged at 0.9170. Today the market is anticipating the conclusion of the Reserve Bank of Australia meeting where interest rates are expected to remain unchanged at 4.5%. However the accompanying media release is expected to contain a hawkish assessment of the domestic economy and a cautious outlook for the U.S which should add some support to the local unit. This could provide enough momentum for the Aussie dollar to have a tilt at 92 cents with the critical 0.9220 technical resistance level looming near. Also expected today is a resolution to the local leadership issue which will add some volatility to the currency markets.

- We expect a range today in the AUD/USD rate of 0.9140 to 0.9220

:: Great Britain Pound: Despite a slow grind higher in Asia yesterday the Pound Sterling came under some strong selling pressure by European investors overnight falling from 1.5485 to an eventual low of 1.5350 against the Greenback. In the aftermath of Friday's dismal PMI numbers it was a pessimistic confidence survey out of the Euro-zone released overnight that dragged the GBP down. It did recover somewhat bouncing back to this morning's open at 1.5390 ahead of the release of the British Retail Consortium's sales monitor which will give the market some indication of the U.K consumer's willingness to spend. With the Aussie dollar holding steady the decline in the Pound puts the GBP/AUD cross rate lower once again opening this morning around 1.6780 after having exchanged as low as 1.6730 at one stage. Today's RBA announcement is sure to see an increase in the volatility on the cross rate with the most likely scenario pointing to another move lower at some point.

- We expect a range today in the GBP/AUD rate of 1.6700 to 1.6825

:: New Zealand Dollar: The Kiwi bounced back from an early Monday morning sell off to 0.7175, rallying to enter offshore exchange back above the 72 cent handle. Despite the natural disaster in N.Z the currency has performed extremely well over the last week and whilst last night's negative European data weighed on risk appetite somewhat the effect on the Kiwi was minimal. After initially dipping from 0.7245 to 0.7210 overnight the NZD/USD bounced back to a high of 0.7255 as European investors went home and with the U.S on holidays it then settled to open this morning at 0.7230.

- We expect a range today in the NZD/USD rate of 0.7200 to 0.7275

:: Majors: A weak Sentix Investor Confidence survey, which measures perceptions on the six month outlook for the European economy, inspired a selloff in the EUR/USD during early offshore trade overnight. After momentarily popping above 1.2900 the Euro then retreated following the news to trade as low as 1.2865. With the majority of U.S investors on holiday and most markets closed for Labour day it was a quiet North American session and the big dollar traded within a tight band to open in Asia this morning at 1.2870 against the Euro. USD/JPY followed a similar trajectory trading lower in Europe before finding some support at 84.05 and opens this morning at 84.20 ahead of the conclusion of the Bank of Japan meeting. The central bank is not expected to announce any new expansionary measures having done so already last week. It is however likely they will continue with the recent rhetoric aimed at curbing the Yen's strength whether it will have any impact remains to be seen.

:: Data Releases: