EUR/USD Forecast: Sentiment towards the EUR deteriorates further post-ECB
|The EUR/USD pair plummeted to its lowest since March 10th, following ECB's decision to delay any modification to its economic policy until next December, when the Central Bank will have better information to assess the performance of the ongoing accommodative policy. Expectations of a QE extension by year-end have increased after the meeting, sending investors away from the common currency.
Overall, President Mario Draghi offered a dovish stance, remarking the importance of maintaining a loosen monetary policy, given the continued downside risks to economic growth. Further weighing on sentiment, was the Q4 2016 Survey of Professional Forecasters, released early Friday, as inflation expectations have been revised marginally down for 2016 and 2018, but are unchanged for 2017. Longer-term inflation expectations are unchanged at 1.8%. Real GDP growth expectations have been revised up for 2016, but down for 2018 and further ahead.
Investors are reluctant to sell further at current levels, given that the pair has been finding buying interest in the 1.0800/40 region pretty much since early 2015, with a couple of breaks below it being quickly reverted. The long term 1.0800/1.1460 range has been in place too long for investors to forecast a breakout. Still, technical readings in the daily and weekly charts support a downward extension, with a major long term target at 1.0461, March 2015 low.
EUR/USD: bearish sentiment leads, but break through 1.0800 does not seem likely at this point
The Forecast poll make by FXStreet shows that, in the week ended October 14th,only 46% of the respondents were bearish in a one-month view in the EUR/USD pair, with an average target of 1.0930. For the week ending October 21st, bears total a 53%, while the average target was downgraded to 1.0850.
In a three-month view, surprisingly, the outlook is neutral, this week, with bulls and bears tied at 42%, although the average target is 1.0790, from previous' week 1.0900, somehow reflecting the limited buying interest around the common currency.
EUR/JPY: targeting 110.00 on EUR's weakness
The negative sentiment towards the common currency is stronger in the crosses, as for the EUR/JPY pair, the poll shows that over 80% of participants are bearish in a one-month view and target the 110.55 region, against previous' week figures where bears accounted 70% towards 112.75.
USD/JPY modest bullish tone to persist
Also interesting, is the fact that despite the yen is seen stronger against the common currency, is also expected to eased against the greenback. Bulls peak in a one month view, reaching 60%, compared to last week, when they were only 44%. By year end, however, is expected to remain steady between 104.00 and 105.00.
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