FORTRADER: Market confidence that the European Central Bank (ECB) will expand its monetary stimulus program at its next meeting, supported by statements from Mario Draghi, is one of the factors contributing to the euro‘s decline. However, experts say that the euro’s inability to continue falling from current levels confirms that this factor has run its course.
What do you think are other factors, besides expectations, that could affect the euro exchange rate? Are there any signs of growth for the European currency?
Euro/USD Rate: Euro Weakness Is Unavoidable
Elizaveta Belugina, analyst at FX BAZOOKA: Analysis of large players’ positions shows that market participants feel very confident in their short positions on the euro. Although the number of net short positions has increased, it is still below the March highs, indicating that the euro still has further bearish potential.
Indeed, the recent decline in the euro to 1.0600 and a series of better-than-expected data from the eurozone have raised doubts about whether the ECB really needs to ease its policy. Nevertheless, although the head of the regulator, Mario Draghi, reiterates that the ECB does not target the euro exchange rate, the central bank certainly understands that a stronger currency could easily disrupt the fragile progress that has barely begun in the European economy.
Possible steps by the central bank are already largely reflected in the EUR/USD rate. However, once Draghi has set the market up for an easing, he will be forced to meet the expectations placed on him. Thus, even if traders believe in December that the ECB has not sufficiently eased its policy, a recovery in the euro against the backdrop of closing some “shorts” will be limited.
We do not see positive drivers for the euro related to the eurozone. A stronger correction in the EUR/USD pair could be caused by the Federal Reserve’s decision not to raise interest rates, but even in this unlikely scenario, we will expect intervention by the ECB aimed at weakening the euro. Therefore, under current conditions, it is better to focus on selling the single currency.
Discuss Forex trading on the forum
- Current situation, discussion and forecasts for Forex (EURUSD, USDJPY, GBPUSD, USDCHF, AUDUSD, NZDUSD)
About the EUR/USD Rate
- Forex forecast for November 26: Convert EUR/USD sales to break-even
- Goldman Sachs: EUR/USD below 1.05 until it is
“,
“excerpt”: “Despite possible outcomes in the EUR/USD pair, focus on selling the euro.”,
“slug”: “euro-exchange-rate-forecast-focus-on-shorting-eurusd”,
“short_description”: “Focus on shorting the euro in the current market environment.”,
“faq_html”: “
FAQ
Why is the euro expected to weaken?
The euro is expected to weaken due to market confidence that the ECB will expand its monetary stimulus program, which supports the euro’s decline.
Can the euro recover?
The euro’s recovery is likely to be limited, as the ECB may intervene to weaken the currency even if the Federal Reserve decides not to raise interest rates.
What is the best strategy for the EUR/USD pair?
The best strategy is to focus on selling the euro given the current market conditions and the potential for further weakness.
”
