'If 1.0670 breaks we might see EUR/USD at 1.0520' - Nenad Kerkez, Admiral Markets

NENAD KERKEZ
PROFILE
• Current Job: Analyst and Full Time Trader at Admiral Markets
• Career: Holds a MSc Degree in Economics at the John Naisbitt University (formerly known as Megatrend). Works as Senior lecturer and market analyst for Admiral Markets

View profile at FXStreet

Nenad Kerkez is an analyst and trader who has been in the market since 2008 and works closely with Admiral Markets as their Head Lecturer and Market Analyst. He is well known in the FX Community, ranking in the top 10 traders and analysts in the Forex Factory High Impact Members Ranking.

Nenad covers over 25 currencies on an intraday basis and has a Masters in economics. He also developed CAMMACD TM, a proprietary trading and analysis strategy. Further, he is the co-founder and head of Elite Currensea Trading, an educational website for currency traders.

The EUR/USD paused its decline just at the 1.0700 area, but it remains below May and July low area around 1.0810-1.0820; Do you see a rebound here or do you believe that further lows are in the table yet?

If you have read my analysis on FXstreet and Admiral Markets I have clearly stated that EURUSD is going to fall heavily. Almost all the targets have been reached, and my latest EURUSD analysisshows that further lows are possible. If 1.0670 breaks we might see 1.0520, but please refer to my latest EURUSD analysis for a full research.

Goldman Sachs forecasted the EUR/USD to be around 1.0500 by December 3rd, before the FOMC meeting. Isn’t it too close to parity? So… what would happen with EUR/USD at this level and then FOMC hiking rates? 

To be honest I am not reading any long term forecasts as I know that currencies are prone to a lot of events which can change the course of the price action. The exchange rate is prone to both micro and macro fundamental factors. If GS is right about 1.0500 and FOMC hikes the rate afterwards, there is a possibility of EURUSD being  already been priced in, so there could be an initial drop then bounce as lower psychological levels of support close to parity are protected ( 00 levels 1.0200-1.0000). 

Don’t you think the British Pound could be a bear trap? I mean… UK’s economy is doing well, an interest rate hike could be possible in the middle term, isn’t it?

Yes I might agree with you. As you could see, GBPUSD could be traded both ways. Both buy the dips and sell the rallies have been viable strategies. In short term pay attention to 1.5250-75 and 1.5310 to the upside, and 1.5105, 1.4990 and 1.4910 to the downside.

We saw a fall in the stock markets at the end of last week. With a Fed hike chance a week before Christmas and uncertainty growing until then, will the equities end the year with a considerable retracement?

As we can see, the SP500 has been in a bull market thanks to US QE since March 2009 post GFC crisis lows.   A large head and shoulders pattern emerged in this Equities market this calendar year, with the market (head) peak occurring in May 2015.  As most Equities markets are positively correlated, most Equities markets across the globe peaked around April to June 2015 also. The long term bull run on the SP500 ended early June 2015 when the long-term trend line was broken and as it entered a sideways market.  

Concerns relating to a Greek debt default and China stock market crash were the early warning signs before global equities markets took a large plunge during the middle of August 2015.

Since the August 2015 plunge, markets rallied to recover most of the losses. However, the prospect of a rate hike in the US is ever closer now that full employment was achieved in the last couple of weeks.  As a result, US Treasuries are now pricing a 25bps rise, so the markets are starting to see early signs of “risk-off” strategies being implemented, where investors shift from risky assets (share markets) to lower risk type assets (corporate and government bonds). In addition, the recent Paris terrorist attacks are likely to have a short-term negative impact on Equities markets. Chinese October economic data was not very good, and European preliminary third-quarter GDP numbers were flat. Commodity prices remained under pressure, with WTI crude moving ever closer to USD40/bbl. On that basis, expect continued pressure on Equities markets leading up to a possible December 2015 US Fed rate hike.

Oil prices broke below $42.50/barrel, extending losses below $44.00; do you see a retest of lows around $38.00?

To answer this question, please refer to my previous update on the Oil market.  In essence, we are in a market where oil supply will exceed oil demand for the short to medium term, so it very possible that USD38/bbl may be reached again.