The Euro Dollar exchange rate is currently forecast to retain a longer-term upside path as suggested by the above graph. This even as we see the euro rate complex slump in the wake of a warning from the European Central Bank that further lossening policy may be announced in June confirming to us that short-term noise and volatility will likely persist.
However, for technical followers the ultimate question is where the key resistance and support levels for the near-term and the longer-date 2014 to 2015 timeframes lie?
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Near-term forecast for the euro dollar exchange rate
The immediate technical picture remains broadly positive for the euro. However, as a note of caution to readers we warn that the May ECB policy decision looms, and any surprises here could be a game changer for the shared currency.
At present most analysts do not foresee any change, however this makes the impact of any surprise all the more powerful.
Nevertheless, the possibility of a test of 1.4 appears to be on the cards, as noted by Neal Gilbert at Forex.com:
"The EUR/USD initially dipped last week before rallying strongly on Wednesday on the back of a weak US GDP report. As you would expect, the secondary indicators are showing balanced, two-way trade, with both the MACD and Slow Stochastics at neutral levels. Heading through this week, a break above 1.3900 resistance could open the door for a move toward 1.3960 or 1.4000 next, though the ECB may be loath to allow the EUR/USD to rise any further than that."
The 2014 / 2015 forecast for euro dollar
Looking at the longer-term picture which encompasses the remainder of the year, Lucy Lillicrap at foreign exchange brokerage AFEX says:
"Little evidence yet exists to suggest current and recent Euro price action here has been top forming but equally values appear unable to resolve much beyond the psychological 1.4000 level either at present. As and when seen such a positive development should signal potential to at least 1.4500 over coming weeks, if not toward 1.5000 as well thereafter, before strong selling pressure re-emerges.
"However in the meantime (as elsewhere) values remain becalmed within a shallow ascending pattern and until this 1.4000 resistance level gives way rally scope remains somewhat restricted. Note: regular demand also limits downside risk as well and unless the secondary support at 1.3500 gives way no major damage should be done here either."
- Danske Bank advise they have lowered their longer-dated forecast on the euro dollar:
"We have lowered our 3M target for EUR/USD a bit but we still expect the cross to trade slightly higher EUR/USD on a 3M horizon and hit 1.40 (previously 1.42) as it will take time for the ECB to deliver more easing. Hence, the euro positive current account and capital flows will be able to dominate EUR/USD on a 3M horizon.
"The latest FOMC minutes also revealed that the FOMC is in no hurry to hike rates when tapering is done. All in all, a new trend lower in the cross should probably not be expected before the ECB starts a new easing round.
"Thus, relative monetary policy will not in our view be able to push EUR/USD lower before 3-6M. However, comments such as the one from the Bundesbank's Jens Weidmann yesterday that the ECB should discuss what assets a QE programme should buy underlines that eventually the current support for EUR/USD will reverse. We target EUR/USD at 1.36 in 6M (previously 1.37) and 1.30 in 12M (previously 1.32)."