EUR/USD Exchange Rate Forecasts: Break Above 1.15 Needed to Improve Outlook

Modified: Tuesday, 06 October 2015 15:13 BST
Written by: Gary Howes

The latest forecasts for the euro to dollar exchange rate from a number of leading analysts.

The euro exchange rate complex (EUR) retains a positive bias on FX markets with the disappointing non-farm payrolls prompting another leg lower in the dollar.

We get the sense that this strength should linger, but there are significant barriers to any sustained advance.

"Investors sold U.S. dollars aggressively after this abysmal non-farm payrolls report crushed hopes for an October rate hike by the Federal Reserve," says Kathy Lien, a professional currency trader with BK Asset Management.

EUR/USD soared above 1.13 intraday on the back of the weaker employment report before settling back near 1.12.

At the time of writing the pair is at 1.1231 confirming 1.12 to be the immediate source of support:

Euro Forecasts

Lloyds Bank Research:

"FX markets are likely to remain mixed in the short term, after the poor employment report on Friday. While our medium term outlook remains bearish for the EURUSD, the data on Friday has left us trapped recent ranges. The data today would need to be particularly out of line to break the range levels of 1.1090 to 1.1325."

Lucy Lillicrap at foreign exchange brokerage AFEX reckons:

"Trend confidence levels here are continuing to fall and given insufficient evidence exists to confirm a major low, EUR values are instead at best range bound either side of 1.1250.

"If the market could establish itself back beyond 1.1500 this (otherwise neutral) environment will become more obviously positive again with another examination of 1.1700 readable thereafter. Otherwise with resistance now apparent starting around 1.1350 as well the psychological 1.1000 level is still potentially vulnerable to attack again in coming days."

Emmanuel Ng at OCBC in Singapore says:

"The meeting of EZ finance ministers and the EU finance ministers meeting on Tuesday may harbour headline risks for the pair in the coming two sessions.

"In the interim, with the dollar on a slight defensive, the 200-day MA (1.1164) and the 55-day MA (1.1160) is expected to provide good support while upside resistance levels are seen into 1.1260 before 1.1300. Near term posture is expected to be supported on dips."

Peter Chia at UOB Group:

On the daily chart, EUR/USD has completed the golden cross (50-day MA crossing above 200-day MA). That is supportive for higher prices for EUR/USD, so for that reason, we will close our bearish bet of “Buy 2mth 1.1300 EUR/USD put with 1.0750 AKO” entered on 21-Sept for slight gain of 7 bps."

Jeremy Stretch at CIBC in Canada tells us:

"Ahead of the publication of the September ECB meeting minutes September services and composite PMI retreated from the flash estimates, seeing in the process services activity sliding to seven- month lows. Additionally retail sales stagnated in August, albeit sales were revised up for July, prompting annual sales to beat median expectations.

"With the region having dropped back into deflationary territory in September, for the first time in six months, expect the minutes of the September ECB to contain discussion of additional policy expansion. Such an expectation favours maintaining a bias towards a lower EUR in upcoming sessions. Only should we see EUR USD trade above post-NFP highs at 1.1319 would we be wary of looking for a test of 1.1200/10 ahead of October 1 lows at 1.1134."

CitiFX see more upside near-term:

Could see a re-test of 1.1300 resistance in EURUSD (tested on Friday) as well as 1.1340 (downtrend triangle) and 1.1466 (post Fed high) but such gains seen unlikely to sustain.