EUR/USD fell to new 2018 lows but stabilized under 1.19. Where next? The team at Bank of America see a potential for falls.
Here is their view, courtesy of eFXdata:
Bank of America Merrill Lynch Research discusses EUR/USD outlook from the long-term equilibrium front which puts EUR/USD around 1.23-1.24, according to BofAML analysis.
“Despite the recent USD rally, the consensus remains bullish on the Euro beyond the short term and expects the EURUSD equilibrium to be well above current levels and between 1.40 to 1.50.
We disagree and discuss analysis suggesting EURUSD equilibrium of 1.23–1.24. Although the twin US deficit and reserve diversification could lead to a somewhat higher EURUSD long-term equilibrium, we argue it cannot be as high as the market expects,” BofAML argues.
BofAML remains bearish and short EUR/USD* in the short term, but expects the cross to appreciate back to 1.25 next year and stay close to this level longer term.
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