Euro Dollar Rate Forecasts for 2014-2015 - page 3

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EUR/USD: Targets Below The L/T Wedge – Goldman Sachs

EUR/USD managed to bounce back from the 9 year lows seen last week, but it is far from an “all clear” mode.

The team at Goldman Sachs note the long term wedge and the targets at very low levels:

Here is their view :

EUR/USD has now satisfied its L/T wedge target at ~1.20 (Jul. ‘12 low), notes Goldman Sachs.

“It’s also gone through a series of three previous lows from ’08/’11/’12 all set near 50% of the initial ‘00/’08 rally (~1.18-1.23) and so far there has been very few material corrections,” GS adds.

From an Elliott wave perspective, GS notes that EUR/USD eventually looks as though it could retrace ~61.8% to ~1.1237 and this decline would in turn complete a multi-year ABC (which began in ‘08) and subsequently the second wave of a LT bullish sequence which originated in ’00.

“In short, 1.12 is likely the level to be watching for signs of a meaningful base,” GS projects.

 

EUR/USD: Euro to Slide to $1.10 by Year-End

Analysts from BNP Paribas lowered their year-end 2015 target for the EUR/USD currency pair to $1.10 as the monetary policies pursued by the European Central Bank and Federal Reserve become more divergent, with the former adding more stimulus while the latter is getting ready for the first monetary policy tightening.

The euro should slide as low as $1.10 in 2015, with the monetary policies pursued by the central banks on both sides of the Atlantic becoming more divergent in the months ahead.

The 19-nation bloc currency traded little changed against the US dollar on Tuesday, remaining above the $1.18 threshold.

"We revised our EURUSD forecasts lower, with our year-end 2015 target falling to 1.10 from 1.15 previously", BNP Paribas said in their most recent research note.

Even though the US dollar came under some increased strain after last week's wage growth data that came in rather disappointing, analysts expect the data will improve in the months ahead as excess capacity in the US economy continues to shrink.

Moreover, the monetary policies pursued by the European Central Bank and the Federal Reserve will become more divergent with the former on the brink of implementing more aggressive monetary policy stimulus.

"We expect ECB QE to be introduced on January 22 and the Fed to tighten in June. The USD has lost momentum but we think earnings growth is likely to improve in future months as excess capacity in the US economy continues to shrink," BNP Paribas continued.

source

 

EUR/USD: Bear Flag Breakdown: Levels & Targets – Nomura

The euro managed to stabilize after the recent SNB-related falls, but it is probably not over.

The team at Nomura looks into the charts, sees a bear flag breakdown and provides levels and targets:

Here is their view :

EUR/USD’s new firm resistance zone now stands at 1.1754/1864 as the market tested the higher band but only to fail back into its major downtrend, notes Nomura.

“The bear flag resolved lower in idea fashion and now extension and wave targets point lower still to 1.1350,” Nomura projects.

“This 5th wave lower from 1.26 would equal wave-3 at 1.1350. Another projection technique is .618 * waves- 1 through 3 and that also yields a target of 1.1350,” Nomura adds.

 

careful at Thursday : first reaction is almost sure to be a raise of Euro

 
on my own:
careful at Thursday : first reaction is almost sure to be a raise of Euro

This is so squeezed that whipsaw is a must. No trading day tomorrow

 

Dollar Strength To Continue With Shift In Drivers – Goldman Sachs

The US dollar gained quite a lot in late 2014 and in the early days of 2015. Can this strength continue? There is potential, and the move could come from other sources.

Fiona Lake, Robin Brooks and Michael Cahill from Goldman Sachs explain:

Here is their view :

“We expect USD strength across the rest of the G10 complex to continue through 2015, with the USD likely posting a 7% appreciation versus the majors by end-2015 after the 10% appreciation recorded in the second half of last year.

So far, the majority of the USD TWI strength against the rest of the G10 has come from two non-Dollar factors: (i) substantial easing surprises by the BoJ and ECB and, to a lesser extent, Norges Bank and the Riksbank, alongside more dovish rhetoric from the Bank of England; and (ii) sharp falls in commodity prices have weakened the AUD and CAD.

Through 2015, we think the driver of Dollar strength will shift and that the USD will increasingly be driven by Fed policy and broader US domestic conditions.

Indeed, our conviction in our Dollar bullish view has gained ground as the Fed downgraded its forward guidance in recent meetings. We continue to expect the Fed to start tightening monetary policy at the September 2015 meeting. Our projections for Fed policy are marginally more hawkish than currently discounted by the market, particularly in the outer years of our forecast horizon.”

Robin Brooks, Fiona Lake and Michael Cahill – Goldman Sachs

 

5 points on why Draghi more than delivered and EUR/USD has lots more room to fall

The ECB announced QE. Buying sovereign bonds in a Quantitative Easing program finally happened, and it happened big time. Draghi seemed determined and rightfully so.

The initial market reaction was somewhat hesitant but the euro began it’s slide. Is that all? Probably not. Here are 5 points about why the move is huge and why it should impact EUR/USD quite severely:

  1. Big flows: 60 billion is more than estimates of 30-40 billion and 50 billion leaked just on the previous day. As Draghi stressed, the flows are certainly meaningful.
  2. Big size: With the intended end date of September 2016, the program has an intended size of over 1 trillion, at the very top end of market expectations. Initial staff preparations were reportedly only at around 500 billion and the markets were moving towards 750 billion.
  3. Basically open ended: While it has an intended end date, the ECB is committed to act until inflation expectations are back to the desired levels of 2% in a sustainable manner. What is sustainable? How are inflation expectations exactly defined? The program could basically stay on auto pilot for a long time before some kind of tapering is announced.
  4. Risk sharing is minor: The compromise to appease the Germans was basically dismissed by Draghi. As long as the euro is stable, the topic of risk sharing and a decentralized move is not really that important. And while Greece is currently excluded, it could be included when Greece exits the program.
  5. Broad agreement: There was a consensus on the need to act and a unanimous agreement that QE is a legitimate monetary policy tool. Draghi did manage to win over the Germans right here.

source

 

Printing the money that will not cause inflation, but only inflate securities prices : Bernanke must be laughing his arse off

 

Greek leftists Syriza keep poll lead ahead of election

Greece's leftwing Syriza party kept its steady lead in the last opinion polls to be issued ahead of Sunday's general election, with questions remaining over whether it will be able to govern alone or need the support of a coalition partner.

Under the election rules, it would need just over 40 percent of the vote to be guaranteed a majority of its own although it could win with slightly less, depending on the results of the other parties.

 

EUR/USD: Selling the rebounds – Morgan Stanley

EUR/USD fell quite a lot after the announcement of massive Quantitative Easing by Mario Draghi, but after the pair reached a trough of 1.113 it made a huge rebound before sliding back down.

Forex trading is never a one way street.How can euro/dollar be traded? Morgan Stanley suggests a strategy:

Here is their view :

Morgan Stanley booked a +400-pip profit today on its short EUR/USD position from 1.16.Expecting further EUR/USD decline and acting on its strategy to sell rebounds from here, MS also added a fresh limit order in its strategic portfolio to sell EUR/USD rebounds into 1.15.

The following are the detailed rationale behind this call along with the levels of the trade (entry, stop, and target) and its potential risk.

Powerful QE:

“The ECB’s decision to expand its asset-purchase program keeps us bearish on the EUR. EUR is swiftly losing support among reserve managers while cross-border investors with European exposure are being paid to hedge the FX. With the long-awaited sovereign QE announcement finally coming through and political risks not going away, EUR/USD could well approach parity,” MS projects.

…But Not Just QE.

“However, our bearish EUR view is not just about QE. We have made the case that the EUR is set to weaken as a result of previously announced monetary policy measures from the ECB, which have already had an impact. We have highlighted three main channels for EUR weakness: portfolio outflows, the use of the EUR as a funding currency and central bank reserve reallocation. There is evidence that all three channels have already been exerting downward pressure on the EUR,” MS clarifies.

“Negative rates and yields have been forcing investors out of European assets and sovereign QE is now set to add to that pressure. European banks’ overseas lending has been picking up, while foreign corporates, especially US corporates, are issuing in EURs, implying that the EUR is being used as a funding currency for both portfolio and business investment,” MS notes.

“Meanwhile, the latest data from the IMF shows that central banks, especially in EM, have been significant net sellers of EUR, reducing the weighting of EURs in their FX reserves. These represent a significant structural outflow from EMU, likely keeping the EUR under significant pressure over the longer term. The addition of QE from the ECB will exacerbate these outflows, we believe, reinforcing the EUR bearish trend, hence our below consensus forecast for EUR/USD,” MS adds.

The Trade:

MS added a limit order in its strategic portfolio to sell EUR/USD at 1.15, with a stop at 1.1650, and a target at 1.0900.

Risks:

‘The key risk to this view would be a meaningful growth surprise in Europe and disappointment in the US. The risk to our bearish EUR view is not a slight EMU growth pickup, in our view. The risks are more likely to come from EMU relaxing fiscal consolidation temporally increasing EMU capital demand, or a shock to the banking sector making banks look inward again,” MS clarifies.

source

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