On Wednesday, 28th October investor attention is firmly focussed on currencies such as USD, EUR, AUD and NZD. During last night some Australian stats on consumer inflation in Q3 of 2015 came out. The figures showed a rise of just 0.5% YoY (expected: 0.6%). QoQ inflation growth was up to 1.5% (expected: 1.7%).
As such, the negative data has led to a weakening of the Aussie dollar against its American and European counterparts. The EUR/AUD hasn’t yet run out of steam and is continuing to grow with the closest resistance level at 1.572 and in the long term the pair has nothing to stop it from rising and renewing a local maximum of 1.659.
The AUD/USD is expected to continue its fall with nearest targets on the pair at 0.70. Over the long term, the pair has chances to update a minimum of 0.600.
A significant impression on further developments on the currency market is being made by the EUR/USD movements. This evening the US Federal Reserve will make public its interest rate decision. Market expectations are split. In actual fact, those believing there will be a rise in the rate are in a minority since the economic risks in doing so are still high, with inflation and unemployment in the States far from their target levels. If the rate is left unchanged, the pair will see a rise and a correction of 1-1.5 figures.
However, we aren’t excluding the FOMC surprising everyone by upping the rates. The consequences of such a decision will be dire for currencies of developing economies. If the rate is increased, the EUR/USD could drop to 1.080.
There’s also another way that the situation could develop. When the meeting ends, it will be important to gain an idea of when the rate will be put up, if, that is, it is not increased today. If the deadline is in 2015, investor reaction could remain negative. Speculators are beginning to correct their positions in accordance with their new expectations, meaning the EUR/USD is one way or another going to fall, whether a few or many points.
Following the Fed decision will be that of the Reserve Bank of New Zealand. There’s no reason to believe they will down their rates. The New Zealand dollar is weak enough and additional monetary policy measures from the New Zealanders are not really necessary, for the moment at least.
As we see it, the NZD/USD is set to fall over the short term and could drop to 0.623 by the end of the year.