EUR/USD 1.05 Target

EUR/USD 1.05 Target

EUR/USD 1.05 Target

In 2016 big names such as Goldman Sachs, Deutsche Bank and BNP Paribas still see EUR/USD falling to parity. While the prospect of even higher rates in the U.S. and continued ECB stimulus will keep the euro under pressure, parity is nothing more than a headline grabbing target. Experienced traders know that these overstretched goals are hard to reach. We agree that EUR/USD will move lower in the coming year and see 1.05 being tested but weaker currencies drive stronger economies and at 1.05, the Eurozone stands to benefit significantly from the combination of ECB stimulus and a lower euro. When the benefits start to be felt through more consistent improvements in Eurozone data, the ECB will feel more optimistic about the economy and less pressured to increase stimulus and that could mark the turning point for the euro. For now, lets focus on the next 4 to 5 cent opportunity in currency. We expect EUR/USD to test its 12 year low of 1.0459 and then bounce 1 to 2 cents before figuring out where it wants to head next.

Technically, there’s only 2 important support levels in EUR/USD – the 12 year low of 1.0459 and parity. If the recent low is broken, it should kick off a quick slide to 1.0000. Taking a look at the longer term chart of the currency, a major top formation can be clearly seen. When EUR/USD broke its 2010 low of 1.1877, there was a quick drop to the 61.8% Fibonacci retracement of the 2000 to 2008 rally. This Fib level at 1.1215 is now resistance and a strong close above this level is needed to reverse the negative sentiment in the currency.

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