EUR/USD En-Route To Parity – Nordea

Draghi certainly delivered and didn’t disappoint: the big QE  announcement sent EUR/USD way down to a weekly close  around 1.12, the lowest in over 11 years.

Where can the pair find a bottom? The team at Nordea has a clear  goal: 1.0000 – parity and here’s why:

Here is their view, courtesy of eFXnews:

The final delivery of an aggressive QE program from the ECB should keep the EUR on the back foot for the foreseeable future. The market’s confidence in the USD will be tested in coming months, but in the end we think the USD will remain the cleanest shirt in the laundry. We now call for parity.

The commitment shown by the ECB in launching its open-ended QE program strengthens the ECB’s guidance markedly, we believe. This should help prevent the EUR from undue appreciation even if the Euro Area shows signs of improving growth in coming months as we expect.

Over the next few months, we may also see a test of market’s confidence in the USD and the Fed owing to 1) delayed effects from USD strength on activity and inflation and 2) seasonal adjustment issues stemming from the deep downturn in 2008 and 2009. Beyond that, it makes sense for the EUR to continue to weaken below its long-term averages. The relative economic situation is far from average.

The same can be said for the monetary policy divergences we predict. To a big extent this is already priced-in in EUR markets. Our positive US story is far from fully priced-in however: at the end of the day we think the Fed will remain on its exit track, suggesting that the USD will remain the cleanest shirt in the laundry

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.