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EUR/USD to parity by year end – Goldman Sachs

EUR/USD is struggling on  lower ground, but still keeps a safe distance from the year’s lows at 1.0460.

Goldman Sachs sees the pair falling in two steps towards parity by year end, with a bolder  target afterwards:

Here is their view, courtesy of eFXnews:

In a note to clients this week, Goldman Sachs discusses the dynamics and targets of EUR/USD into the ECB and Fed December meetings.

In particular, GS argues against a common push-back to its expectation for additional, substantial EUR/USD downside which assumes that markets are rational and should price additional ECB easing, which at this point is widely expected for the Dec. 3 meeting.

GS notes that a similar dynamic drove markets towards the end of last year, preventing EUR/USD from pricing ECB QE in December, even though such an easing step was increasingly obvious.

“It was only with the start of 2015 that markets began to aggressively price QE. EUR/$ fell from 1.21 to 1.16 in the three weeks ahead of Jan. 22, such that the bulk of ECB QE was priced by Jan. 22 (EUR/$ only fell from 1.16 to 1.14 that day),” GS notes.

“It is due to a similar year-end dynamic, a reluctance to position aggressively before the Dec. 31 cut-off, thatwe expect only modest further declines for EUR/$ ahead of Dec. 3, where our target for Dec. 2 remains 1.05.

We think EUR/$ will fall 2-3 big figures on Dec. 3 and then another 2 big figures on Fed lift-off on Dec. 16, taking us to parity by year-end.

Given that the beginning of 2016 is likely to bring renewed vigour to risk-taking, we think it is perfectly possible for EUR/$ to reach 0.95 – our 12-month forecast – by end-March,” GS projects.

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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.