Euro Dollar Exchange Rate Forecast: EUR/USD Could Receive Draghi Boost, But One-Month Bias is Towards Downside
A roundup of the latest long-term and short term technical and fundamental forecasts for the Euro.
Above: We consider the short and medium term prospects for the Euro exchange rate and note that the one month bias at Lloyds Research is lower.
The Euro Rate Today:
The Euro to Dollar exchange rate is marginally lower on a day-to-day basis with EUR/USD resting at 1.3203.
The Euro to Pound exchange rate is unchanged at 0.8453.
The Euro to Australian Dollar exchange rate is 0.32 pct higher at 1.3446.
NB: These are quotations from the wholesale markets. Your bank will affix a discretionary spread. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you more currency. Please learn more here.
Short-term forecast for the Euro vs Dollar exchange rate
Coming hours are likely to be crucial for near-term direction in the Euro.
According to Ipek Ozkardeskaya at Swissquote there is the potential for a deeper sell-off to shape up:
"EURUSD soared to 1.3218 on the worsening US trade deficit yesterday, yet quickly pared gains overnight. The intra-week support at 1.3160 is solid ahead of the ECB policy verdict and President Draghi’s speech today.
"There is still noticeable demand located at 1.3146 (200dma), however trend and momentum indicators are pointing towards a deeper sell-off. Nonetheless, if Mr. Draghi sounds more hawkish/less dovish, the EUR-bulls should come back in charge."
Long-term forecast for the Euro Dollar
We hear from currency analysts at Lloyds Bank Research who today tell us they are forecasting the Euro to maintain a downward bias in the one month time frame.
A note to corporate clients says the Euro Dollar is expected to trade within a range of 1.2900–1.3300 within the next month with a downside bias.
Lloyds say:
"EUR/USD continues to be driven by yield spreads, or, probably more accurately, a combination of yield spreads and credit spreads, with 2 year forward points still a good proxy for the combination.
"At this stage, the upside for the EUR looks quite limited as the front end of the EUR OIS curve is almost as steep as the USD curve, which doesn’t sit well with the still very depressed Eurozone economy.
"While there is potential for the EUR to benefit from some narrowing in credit spreads and concomitant narrowing in cross-currency basis as confidence in the European economy recovers, all the potential for interest rate spread movement seem to favour the USD.
"Nevertheless, the market is already assuming a modest ($15bn) tapering in September, and the risks to this seem to be towards less rather than more, potentially triggering an initial USD negative reaction.
"However, ahead of this the ECB is likely to continue to try to guide European yields lower, and while this may have limited success, we would still see the European curve as having more potential to correct lower from current levels than the US. And the approach to the German election is normally characterised by lower yields, also suggesting risks remain predominantly on the EUR downside."