Daily Forex Forecast 5/7/2010

:: Australian Dollar: The Australian Dollar has failed to hang onto the gains made last Friday following the announcement by the Australian Government of a resolution to the resource super profits tax issue. The unit hit a high of 0.8510 during early local trade, up from the 3-week low of 0.8315 seen less than 24 hours earlier. Offshore, the Aussie endured another volatile session mirroring moves in the Euro before eventually succumbing to risk aversion which sees it open the new week at 0.8410. The Aussie fell from an offshore high near US85 cents after US payrolls fell by 125,000 positions last month in another sign the world's largest economy will be slow to recover.

- We expect a range today in the AUD/USD rate of 0.8340 to 0.8440

:: Great Britain Pound: Pound Sterling opens the new week steady versus the greenback at 1.5195. In economic news, the monthly gauge of construction sector activity, known as the Purchasing Managers Index (PMI), came in slightly less than anticipated at 58.4. Sterling hit a fresh 2-month high of 1.5228 and continues its rebound from the lows seen during May around the 1.4200 area. Meanwhile, the pound opens the new week higher against both the Australian Dollar (1.8030) and the New Zealand Dollar (2.2040).

- We expect a range today in the GBP/AUD rate of 1.7980 to 1.8080

:: New Zealand Dollar: The New Zealand Dollar opens lower today against its US counterpart at 0.6880. In the absence of any local economic data on Friday, the kiwi tracked a stronger Australian Dollar towards a high of 0.6970. However, the gains above US69 cents were short-lived as another bout of risk-aversion gripped the currency during the offshore session. US stocks and commodities fell after US payrolls fell by 125,000 positions last month in another sign the worlds largest economy will be slow to recover.

- We expect a range today in the NZD/USD rate of 0.6830 to 0.6910

:: Majors: The Euro moved above 1.2600 for the first time in 2 months as investors remain content for the time being with the ECBs announcement the previous session regarding the 6 day funding extension to banks that had taken up their 12 month lending program. The Euro zone unemployment rate for May remained steady at 10 per cent which also buoyed the 16-nation currency as this figure was marginally better than economists forecasts. The Euro tracked lower however after the release of the much-anticipated US non-farm payrolls data which showed a decrease of 125,000 positions for the month of June. The jobless rate improved to 9.5 per cent. US stocks and commodities fell whilst the greenback rose against several major currencies on risk aversion as the jobs report signalled the worlds largest economy will be slow to recover.

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