Your Predictions for Direction in the Euro to US Dollar and Pound Sterling Rates

Exchange rate markets continue to hold the euro in low esteem - the 2014 sell-off is forecast by many to extend into 2015.

Indeed, there is no shortage of analysts lining up to cast further negativity on the complex particularly on signs that the German economy is truly on the back-foot at the present time.

Nevertheless, the shared currency is capable of showing some surprising strength which could catch many with a shorter-term approach unawares as we have been seeing this week.

We hear from a number of analysts as to how best to approach the shared currency in the current market.

Euro Rate Today, For reference:

• The euro to pound exchange rate: 0.14 pct lower at 0.7866.
• The euro to dollar exchange rate: 0.33 pct lower at 1.2693.
• The euro to Australian dollar rate: 0.19 pct higher at 1.4432.

If you are holding out for a better rate DON'T DELAY. Ensure your independent FX provider has the correct buy order for when your rate is hit and the correct stop-loss order incase the market moves further against you. Find out more here.

Also note that an independent provider can deliver up to 5% more FX than your bank by coming in tighter on spreads and getting you closer to the wholesale markets, find out more here.

The Contrarian View on Hammering the Euro Yet Lower

Anything contrarian to a sell when it comes to the euro dollar rate is obviously eye-catching in this current euro-negative environment.

Credit Agricole have however stuck their neck out and told clients the following:

"While EUR/USD fell to a multi-year low last week on a further divergence in Fed-ECB monetary policy expectations, we see limited short-term downside from here.

"Our reasons for this non-consensus view are thus. First, the ECB is unlikely to make a case for additional policy action anytime soon with President Draghi already stressing latest measures may prove sufficient to return inflation to target. Second, we perceive room for FOMC members speaking this week to dampen tightening expectations in the wake of last Friday’s payrolls.

"Importantly, we note forward inflation expectations have fallen considerably in recent weeks despite improving growth thereby implicating the strengthening USD. Indeed Fed member Dudley already highlighted USD’s role in dampening inflation would be taken into consideration in achieving the FOMC’s two objectives.

"As such caution is warranted and we advise against selling EUR/USD. To the contrary, shorter-term traders may take elevated speculative short positioning as a que to position for an upside correction to 1.28 in coming weeks."

The Jefferies Strategy on the Euro Dollar

Jonathan Webb at Jefferies gives his stance on euro dollar:

"Last week, we looked for a higher EURUSD post-ECB (where dovish expectations were too elevated) and then lower on a stronger NFP.
However, we just missed our entry level to sell into the key 1.2750 resistance.  We sold EURUSD post-NFP and look for a break of the key 1.2500 level.

"The USD sell-off after the ECB was short-lived which does add weight to our contention that, despite the USD rally of the past few weeks, the FX market is not as long USD as it would like.  

"We suspect that the FX market will be a buyer on any USD dips."

The Swissquote Research Strategy

Luc Luyet, technical analyst at Swissquote reckons:

"EUR/USD has risen sharply after having reached the 1.2500 psychological threshold. An hourly resistance area can be found between 1.2699 (02/10/2014 high) and 1.2715 (see also the declining channel).

"Another resistance lies at 1.2816. An initial support now lies at 1.2605 (intraday low). In the longer term, EUR/USD is in a succession of lower highs and lower lows since May 2014.

"The break of the strong support area between 1.2755 (09/07/2013 low) and 1.2662 (13/11/2012 low) opens the way for a decline towards the strong support at 1.2043 (24/07/2012 low). Intermediate supports are given by 1.2500 (psychological support) and 1.2466 (28/08/2012 low)."