Euro Exchange Rate: EUR Projections Point to Gains Short-Term BUT Long-Term Losses Seen

Euro Rate Today: The EUR has struck a soft tone as we move into December; however the outlook suggests that near-term the shared currency should find a modicum of support as the European Central Bank dithers on future policy action.

That said, a substantial portion of the trading community continue to forecast further declines in 2015 - talk in the analyst community of the euro dollar hitting 1.22 remains pervasive.

Therefore, those looking to sell the euro and buy dollars, pound sterling and other G10 currencies should note that they are currently looking at potentially strong levels.

Those hoping for a weaker euro should remain unhedged in expectation of further declines.

Latest conversion rates (Weekend - markets closed):

• The euro dollar exchange rate (EUR/USD) conversion is at 1.2451.
• The euro pound exchange rate (EUR/GBP) conversion is at 0.7926.
• The euro to Australian dollar rate (EUR/AUD) conversion is at 1.4612.

Above: The euro has seen support kick-in through the course of November.
Beware! All currency quotes seen here are taken from the spot market - your bank will subtract a spread at their discretion. However, an independent FX provider will guarantee to undercut your bank, thereby delivering up to 5% more currency in some instances. Find out how.

Euro Finds Relief as European Central Bank Bides Its Time

Recent comments from ECB member Constancio indicated that the bank is poised to intervene with a balance sheet expansion if a more aggressive policy is needed to stimulate the economy.

Other sources have indicated the bank is waiting to assess the situation but that the pressure to act is building and this will continue to weigh on the shared currency.

The currency markets have agreed with the latter. We have seen the shared currency find support as the ECB adopts a wait-and-see approach as to whether its current measures to stimulate the Eurozone economy are proving effective.

It is only the threat of significant new measures - i.e full-scale quantitative easing - that will ultimately see the euro exchange rate complex break lower.

Euro Weakness Forecast

Martin Schwerdtfeger at TD Securities has told clients that a fresh break lower in the euro dollar rate is inevitable:

"All in all, the ECB meeting next week would seem too soon to make any concrete announcements, but it is safe to assume that at least Mr. Draghi will further fuel QE expectations at his press conference.

"This should keep EUR playing defense; and, if he appears to be resolute on the issue, this might be enough for EURUSD to break new cycle lows below 1.2360."

Looking into 2015, Barclays have released their latest quarterly currency forecasts which confirm a negative bias for the shared unit. The following reasons are cited:

• ECB action and disappointing euro area economic developments have only increased our conviction in a more rapid and sustained depreciation of the EUR
• October’s noticeable spread widening in Europe’s most highly indebted periphery countries testifies to markets’ residual concerns about fiscal sustainability in euro area countries and the structure of the European Monetary Union (EMU)
• The euro area’s difficult economic situation and increased signs of market unease suggest that the distribution of risks now may be even more skewed towards lower EUR exchange rates

Technically Speaking

Piet Lammens at KBC Markets suggests more consolidation is possible from here in the short-term, tying in with our view that these are good times for euro holders to make purchases of foreign currency:

"For EUR/USD further consolidation within the EUR/USD 1.2358/1.2600 range might be on the cards. Over the previous days we already indicated that a swift break lower in EUR/USD wouldn’t be that easy, even in case the data point in that direction.

"This assessment is still valid even as EUR/USD lost ground due to an oil-price driven rebound of the dollar. Next week’s early month US eco data might decide whether there is room for a new USD upleg going into the end of the year."

For those looking to trade the EUR/USD, take note Commerzbank's Karen Jones is targeting a return to 1.24 in the short-term:

"EUR/USD continues to rebound off the 1.2358 recent low, the near term rebound is regarded as corrective only, but needs to halt ahead of the 1.2530 3 month downtrend for immediate focus to remain on the downside.

"Target remains its 200 month moving average at 1.2224. This is major support and is likely to hold on the initial test - it held the downside in 2010 and 2012."

Commerzbank's current tactical strategy is to sell the EUR/USD at 1.2467 and 1.2545. Recommended trade: Lower stop from 1.2550 to 1.2545; target is at 1.2400.