"EUR/USD targets are raised to 1.30 for Q4 2012 and Q1 2013, from previous forecasts of 1.24 and 1.25," affirms the JP Morgan Global FX Strategy team in a recent research. "Targets for Q2 2013 are now 1.32 (previous 1.25) and Q3 1.34 (no previous forecast)," they explains.
"USD determined to win the dismal race to the bottom," states the JP Morgan Team. "Although the world's biggest central banks (Fed, ECB, BoE and BoJ) have been engaging in various forms of QE all year, the USD has been the biggest casualty so far."
"The USD has fallen because Fed QE is fundamentally corrosive for the value of the USD, driving up inflation expectations for an economy that suffers from a sizable current account deficit To offset the Fed's move, the ECB would need to turn its words into action and, at minimum, cut rates aggressively," JP Morgan Adds.
"For the EUR," TD analysts comment, "the tide has clearly turned, and pressure lower is the dominant trend. The broad weight on risk assets and the focus on key hurdles in the ongoing Eurozone saga has seen the single currency make a credible test of the 1.2900/10 support zone in recent hours."
"Headline driven markets make strategic positioning rather challenging, but with days ahead of anything potentially positive out of Europe," Osborne and Moore points, "it is best to stick with the trend. "Below 1.29, the low 1.28 area looks to be the next major area of support," they conclude.
"The days ahead will help clarify whether the US dollar's somewhat firmer tone last week was simply corrective in nature, before a new leg lower, or the carving out of a bottom of a downtrend that began in June against most of the major currencies and July for the euro", says Marc Chandler, analyst at BBH.
The BBH team notes that even though the technical tone has weakened, they still do not see a strong sell signal for short-term participants. "Medium term participants may reduce euro exposure or short dollar hedges into euro strength. A move now back above $1.3080 would/could see another cent advance".
On the Wells Fargo side, the bank "still view the current FX price action as a pause and consolidation after sizable gains for the euro and other foreign currencies earlier this month," the bank comments in a research note. " The next important catalyst for FX markets could be an official request for financial aid by the Spanish government in the coming weeks, which, in our view, should lead to some renewed euro gains and broader US dollar weakness."
In this line, European commission's spokesman Olivier Bailly affirmed that the first tranche of €100 billions Spanish 'financial aid' will be delivered by November once the Troika has known the institution real situation and necessities. Bailly denies, thus, recent talks that Spain could receive first tranche of its banking bailout in the next days.
As next levels to check out, Valeria Bednarik, chief analyst at FXstreet.com points out that the short term bearish momentum, is still temporal and seems too early to talk about a roof and a reversal. According the Bednarik, only a break below the 38.2% retracement of latest bullish leg, that stands around 1.2750, will make the bullish trend hesitate.
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