Exchange Rate Forecasts: Pound vs Dollar Higher, Euro vs Dollar Lower + Outlook for New Zealand Dollar and Yen

A roundup of a selection of today's exchange rate forecasts from those prominent industry names we follow.

Global markets are in a more confident move on Wednesday, and this is aiding the likes of the USD while the EUR has come under pressure.

The key event for today will be the FOMC meeting. After having started the QE exit in December, the markets expect the Fed to continue reducing the pace of the monthly bond purchases from USD 75bn to USD 65bn.

"However, we remind that the freshly elected Fed ChairWoman Yellen (who will be taking over the Fed head from February) is rather dovish and the sizeable disappointment in December NFPs (74’000 nonfarm jobs added vs. 200’000 expected) may give a reason to the Fed to refrain from decreasing the pace of purchases in January," says Ipek Ozkardeskaya at Swissquote Bank.  

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Pound Sterling to US dollar exchange rate forecasts

"Trend and momentum indicators remain in the bullish zone for a daily close above 1.6425. The bias is on the upside," says Ipek Ozkardeskaya at Swissquote Bank.

Analyst Gareth Berry gives a bullish forecast for the pound dollar exchange rate: "As bullish conditions persist, there’s further upside potential to resistance at 1.6747. A break above which would open the way to 1.7043. Support is at 1.6447 ahead of 1.6310."

Craig  Erlam at Alpari UK:

"Sterling is continuing to look bullish against the dollar, after finding significant support around the 50 fib level on Friday before gapping higher at the start of the week. Yesterday’s spinning top candle may have hinted at a bearish reversal today, however the early retracement was short-lived and the pair didn’t even come close to taking out yesterday’s lows.

"Instead it has continued to rally and looks likely to take out yesterday’s highs which would make any reversal very unlikely in the short-term. Once these highs are taken out, the next target will be 1.6667 followed by 1.6745, 28 April 211 high. If we do see a move to the downside, the first target will be yesterday”s lows, around 1.6535, followed by this week’s lows of 1.6473."

New Zealand dollar exchange rate forecasts

We have the RBNZ making a rate decision later today, the outlook for the NZ dollar thus hinges on this event.

Citigroup Inc say:

"NZD rose yesterday on renewed risk appetite as CBT raised rates much higher than the expectation.

"Due to the strong economy and rising inflation rate in NZ, Citi analysts expect the RBNZ may raise rate at tomorrow’s meeting. This will likely be NZD-supportive.

"Technically, NZD/USD may test higher to 0.8432, with support at 0.8162-0.8198."

Euro dollar exchange rate forecast

"EURUSD lacks direction ahead of the FOMC decision due in the afternoon. We expect the pair to remain well bid above the 21-50 day MA levels (1.3633/53) before decision," say Swissquote.

UBS analyst Gareth Berry says he remains neutral on the euro dollar exchange rate: "MACD has breached the zero line in favour of the bulls. Potential test of resistance at 1.3746 ahead of 1.3893. Support is at 1.3623."

Craig Erlam at Alpari:

"Yesterday’s rebound off the neckline of the double bottom has made the eurodollar pair look a lot more bullish in the short term, despite the initial failure to close above the 50 fib level, around 1.37. Based on the size of the double bottom, we should now see a move towards 1.3790.

"Obviously as with all these formations, this is just a rough target but as it roughly coincides with both a previous level of resistance and the 76.4 fib level, it does add a little more comfort. Ordinarily I’m not a big fan of this fib level, or the 76.8 which is the alternative around this level, but as it fits so well on this occasion and falls on a round number, 1.38, it’s probably worth paying attention to. One potential concern is the lack of upward drive following the retest of the double top neckline.

"However, this could just be consolidation in the form of a descending wedge, which is a bullish continuation pattern. Now that we appear to have see a breakout above the formation, the pair could gather some upward momentum. A break above 1.3687, previous high, would back this up, with further targets then being 1.3716 and 1.3739."

Dollar Yen exchange rate forecast

UBS are neutral on the dollar yen exchange rate forecasting, "The much expected recovery has finally commenced as the pair tests resistance at 103.67, ahead of 104.84. Support is at 102.078."

Craig Erlam at Alpari UK:

"The dollar is actually looking a little bearish against the yen, despite trading higher for a third consecutive day. The pair ran into a number of resistance levels over the last couple of days, initially failing to hold above 103.30, where the 50-day SMA intersects the 50 fib level, before moving back below the ascending trend line, which dates back to 18 December.

"Another close below here today would leave a very bearish looking candle, although we’ll have to wait until tonight to see exactly what that is. This currently appears to be confirmation of the initial break below the trend line, which could prompt a continuation of the longer term retracement, with the next target being 101.75, previous low, followed by 101.61 and 101, the 50% retracement of the move from 8 October lows to 2 January highs."