LATEST Euro to Dollar (EUR/USD) Exchange Rate Forecast - Short, Medium & Long Term

July 6, 2014 - Written by John Cameron

STORY LINK LATEST Euro to Dollar (EUR/USD) Exchange Rate Forecast - Short, Medium & Long Term

Short Term Outlook For Euro to Dollar Exchange Rate: The euro (currency:EUR) has shown real resilience since the European Central Bank’s interest rate cuts and targeted Long Term Re-financing Operations (tLTRO) announcement of a month ago.

Last Thursday’s confirmation From ECB President Mario Draghi that his Bank will be making up to €1 trillion available via LTRO acted as a statement of intent, forcing institutional investors to sit up and take notice.

The scale of the ECB’s policy loosening is likely to see investors shift out of euro-denominated assets, so in the near-term we expect euro US Dollar exchange rate (EUR/USD) to drop towards the technically-significant 1.3503 level.

Medium Term Outlook For EUR/USD

The US Dollar (currency:USD) has failed to pick up the support which investors might have expected during the final hours of last week’s session following Friday afternoon’s go-ahead US jobs numbers.

Analysts point to historically low levels for the VIX fear index as a reason that support for the Greenback has remained subdued.

Geo-political threats and imbalances in the global economic recovery suggest that VIX will not remain at such steadily low levels for long, so we expect the Buck to break down through the 1.3503 threshold against the euro in the medium term. The next target for the pair heading lower comes at November 2012’s 1.2662.

Long Term Outlook

We expect the eurozone’s interest rates to remain at the current ultra-low levels well into the long term and Mario Draghi’s reiteration of his ‘forward guidance’ to this effect last Thursday re-enforces this belief.

This leaves the single currency wide open to carry trades from investors, especially if interest rates are steadily increased in New Zealand / South Africa et al, during the next 24 months as per expectations.

The ECB’s delayed reaction to the financial crisis and ongoing concerns regarding regional deflation pose a real threat to the euro. A move down to its 4-year low of 1.2042 – a long-standing key interim floor for the pair - looks a live possibility for the EUR/USD exchange rate in the long run.

Latest EUR/USD Update - 07/07/2014

With economists focusing on the upcoming publication of minutes from the latest Federal Open Market Committee meeting, the Euro to Dollar exchange rate was trending in the region of 1.3584.

As US news is thin on the ground today, movement in the EUR/USD is more likely to be occasioned by reports from the Eurozone.

Already this morning German Industrial Production data has shown a notable decline. If today’s Eurozone Sentix Investor Confidence report also falls short the Euro could stumble.

Euro Dollar Update 08/07/2014

The Euro weakened modestly against the US Dollar on Tuesday morning as investors responded to Germany’s trade data, The EUR/USD pairing slipped by 0.1%.

Later today further fluctuations in the Euro to US Dollar exchange rate could occur in response to news from the US.

The JOLTs Job Openings report is the employment measure favoured by Federal Reserve Chairwoman Janet Yellen, so that will be of particular interest.

Given that last week’s ADP Employment Change and the highly influential US Non-Farm Payrolls reports surprised to the upside, investors will be hoping for another decent result.

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