FXstreet.com (San Francisco) - Goldman Sachs said in a recent
report that their 3-month target is 1.25, but its 1-year target is
1.40. Kathy lien, from BK, thinks that 1.50, despite it is a "big
round number" and people like this kind of numbers, the "1.35 is a
far more realistic target than 1.50.
On the other hand, Rabobank has revised their "FX forecasts on a 1
to 6 mth view to take account of more USD weakness although we
maintain our call that EUR/USD will be positioned around 1.35 on a
12 mth view." Rabobank analyst believes that the "USD could be on
the back foot for some time," but they "expect EUR/USD to push
higher next year." In fact, 1, 3 and 6 month target are bearish to
1.26, 1.28 and 1.30 respectively, but 12-month target is higher to
Rabobank says that both Euro and Dollar are experiencing the same
conditions with the new QE plan that they "traded in the spring
when the impact of the ECB's LTROs was lifting risk appetite."
On Thursday, the Federal Reserve launched its open-end QE3 plan and
overal sentiment was positive as far as market bought it as
Mauricio Carrillo from FXstreet.com commented in his twitter
account:"No QE3 really, it is unlimited QE," because "Fed provides
no limit for buying, not amount, not time, just says 40 billion per
UBS' analysts Geoffrey Yu and Eamon Aghdasi affirms in a recent
paper "Fed's new 'open-ended' easing program has sparked a sharp
rally in risk assets and significant dollar under performance."
Yesterday's QE3 announcement from the Fed continued lift U.S.
stocks on Friday as it did on Thursday.
On Friday, the Dow Jones Industrial Average rallied 53.51 points,
or 0.4% to 13,593.37, climbing 2.2% on the week. The S&P 500
gained 5.78 points, or 0.4% to 1,465.77, finishing up 1.9% on the
week. The Nasdaq Composite added 28.12 points, or 0.9%, to
3,183.95, recording a 1.5% gain for the week.
Goldman Sachs prefers to avoid the euphoria as the financial
institution "has decided not to change our EUR/$ forecast at this
stage, even though spot has clearly moved through our 3-month
target of 1.25."
"First, it is clear that we expect further appreciation on a trend
basis, as visible in our unchanged 1.40 forecast on a 12-month
basis," Goldman affirms. "And second [...] many factors remain
open-ended with regards to the EUR risk premium. The apparent delay
in Spain's request for financial assistance is one example and
other setbacks could lead to temporary sell-offs in the EUR after
the strong rally in recent weeks."
Goldman maintains their "3-, 6- and 12-month forecast for EUR/$ at
1.25, 1.33 and 1.40 respectively, and for $/¥ at 77.0, 76.0 and
Wells Fargo expects the Euro to gain further in the short term but
bearish in the big picture. "The ECB's bond buying proposals, along
with other important policy developments, have driven an
improvement in European bond markets and the euro," points the
Wells Fargo analysts team. "We expect that improvement to extend
further in the next several weeks. The longerterm euro trend
remains lower however, given the Eurozone's economic
underperformance and as the European monetary policy stance remains
What about the 1.50? Kathy Lien sees it unrealistic. "In order for
EUR/USD to rise to 1.50 like it did back in 2011, we need the
Federal Reserve and the ECB to be running significantly divergent
monetary policies," Lien states. "Between January and of April
2011, the EUR/USD was on a tear, rallying from a low of 1.2860 to a
high just shy of 1.50 at 1.4940. During that time the ECB raised
interest rates as the Federal Reserve was in the process of
"Obviously that is not where we are at right now and while we
believe that the EUR/USD could have more room to rise, 1.35 is a
far more realistic target than 1.50," Lien concluded.
The week ahead
As a short week ahead preview, UBS analysts expect "a relatively
quiet week will guide investors back towards Data watch mode. BoJ
is not expected to announce any new stimulus measures in their
policy meeting. Macro indicators such as UK CPI, German ZEW, New
Zealand GDP are due next week alongside Riksbank and BoE minutes."
Finally, the TD Securities team released its COT report with
interestig data about the Euro positions: "The net short EUR
position was trimmed decently to 93.7k contracts (or USD 15.1bn),
from 102.3k, While this is the lowest level since early April, net
EUR shorts still represent the largest aggregate position among
currency speculators. With the EUR's dramatic rise through the
balance of this week, however, a good chunk of these will have
likely been squeezed out."
On the USD exposure, the TD team commented that "IMM non-commercial
accounts further cut exposure to the USD in the week through
Tuesday, September 11. The aggregate USD short position stretched
to USD11.7 bn, from USD2.8 bn in the week prior, as investors
turned sour on the USD ahead of the Thursday's FOMC meeting."