The Australian dollar (AUD) and New Zealand dollar (NZD) have slipped to fresh yearly lows amid technical breakdowns and a cautious broader market ahead of the Federal Reserve’s monetary policy meeting.
The Australian dollar has breached its key August low, with AUD/USD drifting to 0.63134 from its 0.63335 open. This marks a critical technical move, suggesting potential further downside if broader risk sentiment remains fragile.
Picture: AUDUSD flirts with key support near 0.63098 amidst softer momentum, as seen on the VT Markets app.
Similarly, the New Zealand dollar is trading at 0.57405, easing from its 0.57512 open as short-term averages turn downward. The firm break below the 0.5800 handle since last week reflects continued bearish pressure.
Both antipodean currencies remain vulnerable to further declines as markets digest the Fed’s policy stance later today. A hawkish tone could accelerate the selling pressure.
The Federal Open Market Committee (FOMC) meeting remains the focal point for traders today. Broader market sentiment appears tentative, with equities treading cautiously and bond markets taking a breather from recent selling.
The Fed’s outlook on rates and inflation will provide a clearer direction for risk assets and the USD.
Coming up in European trading hours, UK inflation data will take centre stage, setting the tone ahead of the Bank of England’s (BOE) policy decision.
Markets are expecting headline annual inflation to rise to in November, while core annual inflation is forecasted to also see a hike.
The Overnight Index Swap (OIS) market currently prices in a 93% chance of the BOE maintaining its current bank rate. However, stronger-than-expected inflation figures could limit the pound’s downside by reducing expectations for a February rate cut.
The Eurozone will also release final inflation data for November, though the market impact is likely to remain muted. Traders have largely priced in these figures, and focus will stay on the Fed and BOE for directional cues.
Traders should prepare for heightened volatility as upcoming data points and central bank meetings shape market sentiment.
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