EUR/USD Forecast: Credit Suisse says 0.92's Possible
- Written by: Gary Howes
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It is too soon to call a pivot in the Euro to Dollar exchange rate (EUR/USD) say analysts, with one at a major investment bank warning new lows will be gouged out over the coming weeks.
Analysts at Credit Suisse say EUR/USD remains in a downtrend and "fiscal difficulties" facing the Eurozone mean the bottom is not yet in.
They say counter-trend rebounds of 4% should be expected, based on precedent.
The findings, contained in a monthly currency market research report, confirm a recent rally by the Euro is likely to be short-lived and betting on a 'pivot' in this market is premature.
"EURUSD remains in a downtrend with levels as low as 0.9200 possible if fiscal difficulties pick up or Russia-related energy difficulties worsen," says Shahab Jalinoos, head of FX research at Credit Suisse.
Jalinoos says the prospect of "near-term short-covering" should be expected.
The EUR/USD's 2022 low was reached at 0.9535 on September 28, but an improvement in global risk sentiment tempered demand for the safe-haven Dollar, prompting profit-taking and a recovery higher.
The exchange rate is back at 0.9945 at the time of writing, taking bank account transfer rates to around 0.9668 and those offered at independent payment providers to approximately 0.9916.
Above: EUR/USD at four-hour intervals. To better time your payment requirements, consider setting a free FX rate alert here.
The Dollar came under particular pressure on Tuesday following the release of some softer than expected labour market statistics from the U.S., this encouraged market participants to wonder whether the economy was now slowing enough to prompt the Federal Reserve into reconsidering its aggressive interest rate hiking policy.
"The weaker than expected U.S. Jolts job opening data yesterday combined with the smaller than expected rate hike from the RBA triggered a round of speculation that the Fed may also be prepared to moderate the extent of its rate hikes," says Jane Foley, Senior FX Strategist at Rabobank.
But Foley says it is too soon to call a pivot in Fed policy and with it a pivot in EUR/USD.
"While market speculation over a potential pivot suggests that data such as Friday’s US September payrolls release will be even more closely watched, it would appear likely that this speculation is probably too early. We remain USD bulls and retain our EUR/USD 0.95 target on a 1 to 3-month view," she says.
"We favour selling on rallies to 1.0000," says Jalinoos.
Based on this view, given the market is now 50 pips away from the parity level, traders betting on further declines in EUR/USD will be looking to reenter around current levels.
Credit Suisse says corrections higher could be expected to continue extending by at least 4% from each new low based on recent precedents.
