Daily Forex Forecast 12/7/2010

:: Australian Dollar: The Aussie dollar traded within a 50 point range between 0.8725 and 0.8775 for the majority of Friday's offshore session and opens this morning towards the top end at 0.8770. Japanese elections, developments in Europe and a strong close in U.S equities dominated currency flows heading into the weekend with a soft Yen holding the AUD/USD back from a clear break through 0.8780. Australian May Home Loan and Investment Lending data is scheduled for release today with several sentiment surveys also on the horizon for the Aussie dollar this week. On the technical front momentum seems to be building for an eventual break above the psychological 88 cent level however the major chart resistance appears to be around 0.8850 which will prove critical to the longer term strength of the current rally.

- We expect a range today in the AUD/USD rate of 0.8720 to 0.8800

:: Great Britain Pound: The Pound Sterling fell sharply on Friday dropping from 1.5200 to open this morning on its lows at 1.5055 against the Greenback. Disappointing U.K data in the form of a larger than forecast widening in the Total Trade Balance from 3.5 to 3.8 billion GBP and lower than expected Producer Prices triggered the move out of the Pound with this evenings GDP and Current Account also likely to fall short of expectations. With the Aussie dollar tracking sideways the Pound weakness puts the GBP/AUD cross rate lower this morning well down from early London highs near 1.74 exchanging at 1.7155.

- We expect a range today in the GBP/AUD rate of 1.7100 to 1.7250

:: New Zealand Dollar: The Kiwi tracked movements on the Aussie dollar during Friday's offshore session bouncing between support at 0.7060 and resistance at 0.7110. With a distinct lack of any meaningful European or U.S economic data it was weakness in the Pound Sterling and the Japanese Yen that dictated demand for the Greenback and the Kiwi as a by product. This morning sees the NZD open towards the top end of the range at 0.7105 against the Greenback and 1.2330 Australian dollars, down from Friday's peak at 1.2380 Aussie.

- We expect a range today in the NZD/USD rate of 0.7050 to 0.7125

:: Majors: The Euro rallied during late Asia on Friday to post a high around 1.2720 before paring back gains to finish the week at 1.2640. With a lack of any market moving European economic data direction for currency markets came from weakness in the Japanese Yen ahead of the weekends elections where it was expected that the Democratic Party of Japan would lose its control of the upper house. The Yen weakness saw USD/JPY bounce from its lows at 88.35 to finish near 88.70 with demand for the Greenback increasing following better than expected U.S Wholesale Inventory data for the month of May. The biggest mover however was USD/CAD which shed over a cent dropping from a high of 1.0450 to 1.0295 after the announcement that the Canadian economy added 93.2k jobs in June, well above economist forecasts for a rise of around 20k taking the unemployment rate down from 8.1% to 7.9%.

:: Data Releases: