Euro / Australian Dollar Exchange Rate Forecasted to Fall by UniCredit Who Say 2Q 13 EUR-AUD Ascend was Excessive

In late afternoon trade in London we see the Euro to Australian Dollar exchange rate is trading 0.3 pct lower on a day to day basis at 1.4392.

The Australian Dollar to Euro exchange rate is at 0.6948.

Please Note: The above are spot market quotes; your bank will affix a discretionary spread to the figures when passing on a retail rate. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering more currency. Please learn more here.

This is the second euro-negative theme we have picked up this afternoon; the first was a Euro-negative call made by Kathy Lien at BK Asset Management, coverage of her Sell call on the Euro Pound exchange rate can be found here. See below for her Sell call on the Euro to New Zealand Dollar exchange rate.

UniCredit Forecast a Decline in the Euro to Australian Dollar Exchange Rate

Dr. Vasileios Gkionakis, Global Head of FX Strategy at Italy's UniCredit Bank says he is forecasting a fall in the value of the Euro against the Aus Dollar based on the following three factors:

"Firstly, examining quarterly returns since 2000, we find that the 2Q13 EUR-AUD ascend was excessive; similar historical quarterly increases – although not very frequent – have led to strong negative returns over the next quarters. With EUR-AUD virtually flat so far in the third quarter, we think that mean reversion suggests meaningful downside to the currency pair in the short-term.

"Secondly, the improvement in Chinese data argues in favor of Aussie strength. We construct a simple dummy variable model and show that historically, similar movements in the official Chinese PMI have been associated with strong negative excess EUR-AUD returns on a three-month ahead horizon

"Thirdly, following the substantial appreciation in EUR-AUD since the 1Q13, the currency pair is no longer undervalued; in fact, based on our newly constructed "BEER by Unicredit" valuation model, the implied equilibrium value of EUR-AUD is around 1.36, making the cross currrently overvalued. Although convergence to "fair" value takes long periods of time, we think that this "switch" from "under" to "over" valuation no longer presents an obstacle for the currency pair to move lower in the short term."

Euro to New Zealand Dollar Exchange Rate Forecasted to Fall

In addition to the above, the Euro is also forecasted to weaken against the New Zealand Dollar.

Kathy Lien at BK Asset Management says:

"The most exciting event risk today is the Reserve Bank of New Zealand's rate decision. While the central bank is not expected to change interest rates, a strengthening local economy, improving outlook for Australia and China and lending restrictions that could cool the housing market could prompt some optimism.

"The only area of concern is the level of the currency but the NZD is off its highs against the AUD.  As a result, we are looking for further strength in the New Zealand dollar that should eventually drive EUR/NZD towards 1.60.  

"Of course, we could be completely wrong and RBNZ Governor Wheeler decides to remain cautious, at which point the currency pair could rally before heading lower over the longer term."