Is the euro overvalued at current levels?
Latest rates
The euro dollar exchange rate remains stuck in a rut - the EUR/USD is at 13343 at 15:00 in London.
The euro pound exchange rate is 0.2 pct in the red at 0.8480.
The euro Australian dollar exchange rate is 0.24 pct higher at 1.3914.
Note that these spot reference exchange rates to which your bank will add a discretionary spread, however an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please find out more here.
Euro looking 'rather rich' at current levels
Shaun Osborne at TD Securities tells us he considers the euro to be generously valued at current levels:
"EUR-USD has been progressively more consolidative over the past three trading days, and the bull run that nearly reached 1.3400 seems to have run out of steam.
"Speculative shorts (as per the CFTC) have been pared almost entirely now which means the market may need a stronger fundamental driver to see significantly higher levels from here. The FOMC and EZ PMIs (Thurs) are the two main developments to watch, which should break the narrowing wedge in the mid 1.33 area. Fundamentally, the EUR continues to look rather rich to us at current levels."
Long-term the US dollar is 'a strong buy'
Today we also hear from Leander Dreyer at Jyske Bank who says his bank remains of the opinion that the US dollar will eventually get the better of the euro in the longer term:
"In the short term, anything can happen, but in the medium to the long term, USD is a strong buy.
"After EURUSD was traded through 133.50, there is now scope for a movement up towards 135 - 137, with a single weak point of resistance at 134.50.
"For the long term, we still have a very negative view of EURUSD. We have a 3M target of 124 and a 6M target of 121. The continued divergence between the growth-driven asset classes (commodities and emerging markets) and the liquidity-driven asset classes, particularly in the form of equities (both leading US and European equities) is jeopardising the upturn of EURUSD.
"If the Fed begins to reduce its easing measures, and the equity market begins to cave in, USD will be in strong demand, not just relative to EM and Japan, but also in relation to EUR. When that happens, EURUSD will be traded down into the twenties in a very short time. The first important level of support to keep an eye on is 130.50 and then 127-28.
"One reason why EURUSD did better in the recent period - better than most analysis houses had expected - is that several central banks in the emerging markets (particularly Asian and Latin American) sold USD extensively over the last couple of weeks. Also, they have bought their various currencies in an attempt of slow down the selling of their currencies.
"Also, several European banks and hedge funds have closed down their EM positions. And as they had EUR as funding currency, this resulted in demand for EUR. Particularly this positioning is the reason why EURUSD has not fallen recently where the market was a risk-off market.
"Once again this illustrates that the financial market has become more complex than has been the case in several years and that there is increasing divergence both between the asset classes and within the various markets. This being said, we are still very convinced that EURUSD is in the last stage of the correction that has been going on since EURUSD bottomed out at 121 in July 2012. We do NOT expect that EURUSD will get back to the top in February at 137.11.
"Conclusion: Even if we in the short term may see a few movements in EURUSD, we are very bullish on USD in the medium to the long term.
If EURUSD closes below 127.50, the cross rate leaves a technical top formation referred to as a shoulder-head-shoulder formation, which often means that there is room for declines of several figures."