Goldman Strategist Warn Of Further EUR/USD Weakness Headed To 1.10
The Euro is likely to remain under pressure. Those are the sentiments shared by strategists at Goldman Sachs who expect the strengthening of the Dollar to continue piling pressure on the EUR/USD currency pair.
Euro Bearish Stance
In response to recent weakness, the strategists expect the Euro to find its way to the $1.10 level, in the next three months, given the surging bearish pressure. The sentiments do not come as a surprise given that the currency has shed a significant amount of value and now finds itself languishing at 22 months lows.
Weak economic data amidst growing concerns over the trading Block’s recession has not helped the Euro, which has continued to edge lower in recent weeks. For instance, German IFO Business climate dropped to 99.2, shy off consensus estimates of 99.9. Consumer confidence in the trading block also remains mired in negative territory with a score of -8.
Dollar strength shows no signs of cooling off, given the flurry of positive economic data. The greenback received a boost on durable goods orders climbing 2.7% to beat consensus estimates of 0.7%. Core, durable goods orders, were also up to 9-month highs after a 0.4% gain. A GDP release of 3.2% for Q1 was also way above expectations, and much stronger than 2.2% for Q4.
The strengthening of the dollar has continued to pile pressure on the Euro as robust economic data in the U.S. fuels suggestions that the Federal Reserve could be forced to change its policy stance. As the US economy remains stronger, the Eurozone continues to grapple with a slowdown. The European Central Bank is not expected to hike interest rates in 2019 a move that could have ramped up support on the Euro.
Weak economic data is not the only headwind pilling pressure on the Euro. Concerns about potential trade tariffs from the U.S. has plunged the auto industry into uncertainty, ahead of the much-awaited Spanish and EU elections.
EUR/USD Price Analysis
The EURO is likely to continue falling in a descending trend line given the underlying bearish downtrend. The currency pair is currently trading below the 200-week moving average, which supports further downside action.
After falling 0.9% last week, the currency finds itself trading in the sub 1.1139 level, amidst soaring short selling pressure. With the pair currently trading in a descending channel, there is still some ground to cover before the pair hits support at the 1.1075 mark A plunge below the 1.1109 mark should confirm an extension to the 1.1075.
The main event that could affect EUR/USD direction of trade in the week ahead includes preliminary estimate touching on GDP growth, set for Tuesday. While the GDP data from the US and China have so far come out positive, the same is not expected of the Eurozone given the stream of weak economic data that has come into play in recent weeks.
Friday is another important day on economic releases as the market awaits March Producers prices as well as inflation readings.
“A combination of disappointing GDP and inflation prints would be the worst outcome for the euro, which crumbled below its key support around $1.1180 this week,” says Raffi Boyadijian, an economist at FX broker.