On Wednesday morning, markets calmed down noticeably after Monday's sales. There is low volatility, and the US dollar index is changing in a narrow range, as investors have no reason to take any action before the announcement of the results of the FOMC meeting.

The primary thing that traders will track in the FOMC statement is the decision to reduce QE. If the upcoming reduction is announced today, the markets will perceive this wording as a hawkish factor, which will lead to a fall in stock indices and demand for protective assets, Meanwhile, the US dollar will rise following the meeting. But if the announcement of the reduction is postponed until November (the probability of such an outcome is now estimated at 65%) or even until December (the probability is 18%), then we are waiting for another prolonged period of uncertainty, which will be characterized by the upward correction of stock indices and commodity prices, and hence commodity currencies.

Other outcomes of the meeting, such as changes in forecasts or a dot chart on the rate, are less interesting, although they are also important from the viewpoint of assessing the Fed's plans.

NZD/USD

After the publication of optimistic GDP data for the 2nd quarter, ANZ bank expressed the opinion that the economy continues to demonstrate stability – house prices rose by 1.9% in August, despite the blockages, which is associated with the positive impact of the FOMO program.

Meanwhile, the latest PMI data is unexpectedly weak. There was a decline from 57.9 to 35.6 p in the services sector, and a decline from 62.6 p to 40.1 p in the manufacturing sector. There is every reason to believe that GDP and output will significantly decrease in Q3.

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However, the weak data did not cancel the optimism about the beginning of the RBNZ rate hike cycle. In mid-August, anti-COVID-19 measures were expanded. The fall in the PMI is associated with these measures, and it is expected that there will be strong GDP growth in the 4th quarter, which will give the RBNZ grounds to adhere to the rate plan.

The New Zealand dollar has not yet reacted to RBNZ's Hawkesby, who expressed concerns about the prospect of a rate hike by 50 points in October, saying that central banks usually do not change rates in times of uncertainty.

The indicated currency is one of the few commodity currencies where there is an increase in the net long position, namely a weekly change of +166 million. Moreover, the NASDAQ stock index shows amazing stability amid massive correction of US stock indices in recent days, which indicates investors' confidence in the strength of the New Zealand economy. The estimated price is directed upwards, and the forecast is positive.

The general pressure on commodity currencies led to a correction from the recent high of 0.7168. We expect a strong bullish driver to form after the announcement of the results of the FOMC meeting, which will turn the pair upwards. The first target is the level of 0.7166, followed by 0.7315. A consolidation above will mean the end of the correction wave that has been lasting since February.

AUD/USD

The Australian dollar formed a quite large net short position, which increased by 897 million over the reporting week, reaching -6.104 billion. This is a fairly significant bearish advantage, which also does not show any signs of contraction. The target price remains below the long-term average and the outlook for a bullish reversal is weak.

Representatives of the RBA give very cautious comments, excluding any specific wording regarding the RBA's plans. The head of the RBA, Lowe, noted last week that higher interest rates can lead to lower house prices, but at the same time mean a reduction in the number of jobs, and this is a bad compromise.

It can be assumed that the time has not come for the Australian dollar to rise yet. And although bearish impulse is weakening, a movement towards the support level of 0.7108 is still more likely than an upward reversal and an attempt to update the local high of 0.7479.