Daily Forex Commentary 27/7/2010

:: Australian Dollar: The Aussie dollar held on to support around 0.8940 during the Asian session despite a lower than expected second quarter Producer Price Index or PPI as its referred to. PPI is an important measure of supply side inflationary pressures as it measures the price of finished goods and services sold by producers. Economists had forecast a result in excess of 1% with the 0.3% rise casting some doubt about the likelihood of an interest rate rise next week when the RBA meets. Despite the news however the AUD remained resilient entering the offshore session around 0.8970 before eventually moving higher during the U.S trading day. Strong North American housing data and a rally on Wall Street spurred demand for the AUD with the psychological 90 cent barrier finally giving way. This morning sees the local unit open near the highs around 0.9020 ahead of the Conference Boards Leading Index for the month of May which will provide the market with a forecast on the short to mid-term state of the economy.

- We expect a range today in the AUD/USD rate of 0.8975 to 0.9075

:: Great Britain Pound: The Cable finally managed to crack through technical resistance at 1.5450 overnight rallying to an eventual three month high of 1.5520. Positive sentiment towards the state of the U.K economy and the European banking system continued to underpin the gains in the GBP ahead of the Bank of England Governor King's testimony before the Treasury Select Committee in London on Wednesday where some supportive comments are likely to see continued demand for the Pound Sterling. This morning sees the GBP/USD open back slightly below the 1.5500 mark at 1.5485 however the GBP/AUD cross rate opens substantially lower than yesterdays Asian close of around 1.7250 at 1.7160 on the back of a higher Australian dollar.

- We expect a range today in the GBP/AUD rate of 1.7150 to 1.7275

:: New Zealand Dollar: The Kiwi dollar held firm during yesterday's Asian session bouncing from 0.7250 to enter offshore exchange around the 73 cent level. It was a subdued European session with sellers ahead of 0.7320 capping any attempts at further advances. It took the announcement of a massive increase U.S New Home Sales to spark the markets bolstering risk appetite and the NZD/USD exchange rate. After popping through the sell orders at 0.7320 the Kiwi took out April highs to exchange around 0.7350, its highest level since January this year. Profit takers stepped in during late North American trade to trim some of the gains and see it open this morning around 0.7330.

- We expect a range today in the NZD/USD rate of 0.7285 to 0.7385

:: Majors: The Japanese Yen strengthened considerably during yesterday's Asian session rallying to eventually retest recent lows at 86.80 against the Greenback overnight. The move began following the release of the June Merchandise Trade balance data which saw the adjusted surplus increase to 456 billion Yen, up a whopping 42.4% from the previous month. With European investors somewhat placated by the stress test results and a lack of Euro-Zone economic data EUR/USD searched for direction bouncing between 1.2890 and 1.2950 for the majority of the London trading day. The volatility increased however during the North American time-zone following the release of better than expected housing data for the month of June. New Home Sales beat forecasts for around 310k to come in at 330k, a whopping 23.6% increase from the previous months 276k result. Coupled with more gains on U.S equity markets the news inspired a fresh wave of EUR/USD demand taking it back to retest the 1.3 handle. This morning sees the big dollar opening at 1.2990 and 86.90 against the Euro and Yen respectively.

:: Data Releases: