EUR/USD Conversion Rate Slips Below 1.10 and Opens Door to 1.06

New euro to dollar conversion forecasts from a leading institutional analyst suggests the euro will reach its lowest level in the autumn of 2015.

The euro has broken below the 1.10 level as a period of relative strength for the shared currency comes to an end. The move below 1.10 is significant as this area represents a significant psychological level of support. It seems more traders in the market are willing to sell the euro and buy dollars below here confident that others are willing to push the rate lower.

“For the technically-minded, EUR/USD’s slip below 1.10 is rather exciting, as it breaks a key line of support at 1.0995. Overnight, EUR/USD bounced off the 50-day moving average at 1.0954, but we don’t imagine it would have held, had there been materially negative news,” says Raiko Shareef at New Zealand’s BNZ.

The push below 1.10 opens up the prospect of a quick test of 1.0640 forecasts Shareef. Be aware that any currency rate referenced here refers to the wholesale markets, when you make an international payment / transfer your bank will offer you a rate at their discretion. However, using an independent provider will get you closer to the market rates, in some instances this results in up to 5% more FX being delivered, find out how.

Long-Term Forecasts: 1.02 and Parity before a Rise to 1.08

Those watching the euro to dollar conversion will naturally be wondering how far the currency pair will go and where the limit to the selling pressures lie.

Christin Tuxen, Senior Analyst at Danske Bank says he sees the pair heading to fresh lows in 2015, but the sell-off will unlikely have the momentum to break sustain levels below the 1:1 rate of exchange. In this month’s forecast note on the euro dollar, Tuxen says:

“Fundamentals still favour a lower EUR/USD on a 3-6M horizon in our view, with the outlook for a first Fed hike earlier than priced, and an ECB committed to an aggressive easing scheme.

“Relative rates will thus in our view again start to weigh on EUR/USD ahead of the summer. We still think EUR/USD will bottom in early autumn and now project 1.08 in 3M and 1.02 in 6M, with the possibility of undershooting towards parity. But once eurozone (headline) inflation starts edging up in H2, the re-pricing of the Fed has come to an end, and an eventual ECB QE exit moves to the fore, EUR/USD should start its journey towards the (higher) levels warranted by medium- to longer-term fundamentals. We still project the cross at 1.08 in 12M.”

This viewpoint is illustrated in the below graphic:

Greece Faces Wall of Payments

We continue to receive feedback from our readers that confirms for those looking to exchange currency, the situation in Greece remains high on the agenda with many anticipating a Greek exit from the Eurozone.

“The ongoing negotiations between Greece and its creditors remains front of mind, especially with the wall of repayments due to begin in just days, starting with a €300m chunk to the IMF on 5 June. The market is positioned for a deal to be struck by end-May, but events over the weekend would have caused some unease,” says Shareef.

In particular, a faction of the ruling Syriza party only narrowly lost (75-95) a motion calling for the Greek government to halt talks with creditors if they continue to “blackmail” the country. Instead, the country should seek “an alternative solution”.

Does an alternative solution mean an exit of the Euro and the return of the Drachma? Surely this would be the best outcome for Greece and the Eurozone. Once Greece has control of its currency and finances it can start taking responsibility for its economic and financial management.

Furthermore, the Eurozone has to communicate to its members that fiscal and monetary union is absolutely essential to its existence and those countries unwilling to make the sacrifice will themselves be sacrificed. The bottom line - removal of Greek uncertainty in any shape or form is a positive for the euro.