World’s Best Forecaster Targets Euro-Dollar Parity
Morgan Stanley Currency Forecasts 2015
Please find below the exchange rate forecast table and a brief synopsis for each G10 major for 2015 issued by Morgan Stanley.
The US Dollar: "We would use any dips in USD as a buying opportunity. Higher US rates is not the crux of our strong USD argument – it’s US growth, which is likely to remain strong."
The Euro: "We believe EUR is likely to remain a sell over the course of 2015 as ECB easing remains a prominent possibility and political risks loom large. Comments from ECB members suggest the committee is moving towards further easing in January. What’s more, with Greek elections now before the end of the year, political risks are rising in Europe, which could add a risk premium to EUR."
The Yen: "Medium term bearish JPY view."
The Pound Sterling: "We remain bearish on GBPUSD. The BoE believes inflation could fall further, and both our economists and markets have pushed back their estimate of the timing of the first hike. What’s more, the latest OBR forecasts suggest that the UK’s fiscal position is worse than previously thought. Further austerity is likely, which will weigh on UK growth, supporting our bearish view."
The Swiss Franc: "We remain bearish on CHF over the medium term. The SNB retains its 1.20 EURCHF floor and would come in to defend if necessary"
Canadian Dollar: "Oil prices have fallen over 40% since the start of June, yet CAD is down only 5% against USD, the least of any G10 currency. CAD’s exposure to a robust US economy renders it the strongest commodity currency, and we hold our NZDCAD short position. That said, we believe USDCAD is likely to rise as oil prices decline, and wouldn’t be outright bullish against USD."
Australian Dollar: "We expect AUD to remain weak for several reasons. First, Chinese growth remains soft. PPI has printed negative for 33 months in a row, and the recent rate cut has not loosened financial conditions. Second the latest news on Australian banks suggests that they could have to raise capital, providing further headwinds to growth. Third, iron ore prices have barely recovered. Soft commodity prices should also weigh on AUD."
New Zealand Dollar: "We keep our bearish outlook on the NZD. The RBNZ has flattened its tightening bias and thus has been more hawkish than expected by the consensus, stating that house price inflation as the main reason for keeping the tightening bias, allowing NZD to rebound. Falling income from abroad, declining investment activity and a significant debt problem, house price inflation should soon ease off. The bank also still sees the NZD as overvalued and expects depreciation."
Swedish Krona: "While we remain bearish on the SEK over the medium term since the country is still in deflation and the central bank remains accommodative, there are signs that inflation is picking up which could provide some short term support for the SEK. We remain bearish on NOKSEK which could also provide some support."
Norwegian Krone: "We remain bearish on the NOK and the view has been supported by the central bank who cut rates by 25bp. They have opened the door to further cuts from 1.25% to 0.75% in the next few months. The reason for the cut was the large downside risks to growth. Lower oil prices have posed a risk to the NOK and now we focus on the second round effects on the economy. The NOK needs to adjust lower for the economy to become more competitive, supporting our view."
The script is made. Now lets see how Goldman & Sachs employees like Draghi make it happen
5 Most Predictable Currency Pairs- Q1 2015
Some currency pairs slow down when they approach a strong line of support or resistance, and follow by bouncing back within the range. If momentum is significant, these type of currency pairs will make the break without looking back. These are the more predictable currency pairs. However, not all currency pairs enjoy this kind of technical behavior.
The predictability of currency pairs is not always stable on its own: changes in monetary policy, volatility and seasonality are among the factors changing the behaviors. Here is an updated and ranked list for the 5 most predictable currency pairs for Q1 2015, each one with its own style:
- AUD/USD: This currency enjoyed predictable behavior while it was trending down and has the capacity to respect support and resistance lines. When the pair posts higher highs, it trends up, and when it posts lower highs, the direction is down. This textbook behavior in channels and ranges is set to continue.
- GBP/USD: Cable usually suffers stronger and sometimes more violent moves than EUR/USD but these are becoming smoother, placing the pair higher in the list. One of the reasons for the more predictable behavior is the fact that both the BOE and the Fed are set to tighten. This certainly doesn’t mean that ranges are small: they are still wide but are just more respectful to technical lines. Note that when we have a breakout, the pair marks the edge of the next range before ranging within it.
- NZD/USD: For those that do prefer narrower ranges, the kiwi often provides opportunities, especially if you look back on the charts: the kiwi has a good memory for old technical lines as well as new ones. This is set to continue.
- USD/CAD: Often overlooked by traders, this pair returns to the list. The huge volatility in oil prices, which is set to continue, has contributed to bigger movements and better predictability for the pair. The pair has a tendency to bounce first, break later when it encounters big lines.
- EUR/USD: The world’s most popular pair has enjoyed nice behavior in Q4, amid a clear trending lower. And while it remains on the list, it falls to the last place. The specter of QE in the euro-zone is a game changer and could trigger unexpected behavior. The general trend is down, but the path is set to be more bumpy. This pair could be goof for a longer term position, but could be harder to trade in shorter terms.
They way it is going, it can reach parity already the next week (if ECB does what is almost sure now) 
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Being more bearish on the euro than the consensus helped ING Groep NV become the world’s most accurate currency forecaster in 2014. The Dutch bank sees no reason to change its strategy now, breaking from the pack to predict a drop to parity with the dollar within two years.
After watching the 19-nation currency slide as low as $1.1792 today from last year’s high of $1.3993 in May, ING sees it continuing to weaken all the way to $1, a level last seen in 2002. The median estimate of more than 30 forecasters in a Bloomberg survey is $1.15 by the end of 2016.
ING expects measures by the European Central Bank to boost the euro zone’s flagging economy and avoid deflation will have direr consequences for the currency than most other firms. Few investors will want the euro as policy makers expand the money supply, especially as the Federal Reserve makes dollar assets more attractive by raising interest rates.
“We are one of the most bearish houses on euro-dollar,” Petr Krpata, a foreign-exchange strategist at ING in London, said yesterday by phone. “It looks as if the Fed will start hiking rates sooner rather than later, potentially even late in the second quarter, and this will further fuel the divergence on policy.”
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