The EURUSD Forecast by Jimmy Young

EURUSD Forecasts – 1 Month, 3 Months, and 1 Year

On Wednesday, August 27 I received a request from a broadcast journalist for a professional opinion on how a currency pair will move in three different time frames; one, three and twelve months. They said I could choose the currency pair and the interview would last five minutes.
The EURUSD currency pair moving lower immediately jumped into my head. My thinking is the Eurozone fundamentals clearly point to a weaker EUR and that alone should be enough to drive the EURUSD pair lower over the coming weeks and months.

Eurozone Fundamentals:
Bearish monetary policy

o   Interest rates are low and heading lower
o   Quantitative easing (printing money) in the near future is a good possibility

Bearish economic fundamentals

o   Inflation is too low right now and is continuing to decline right now
o   Unemployment is too high right now and appears stuck at a very high level

Bearish geopolitical problems

o   Ukraine chaos not good for Europe and its likely to persist, possibly escalate
o   Euro member Government’s deficits are still a big problem

Bearish sentiment

o   Some Euro member Governments calling for a weaker Euro
o   European Central Bank (ECB) President Mario Draghi talking down the EUR

An unmistakably bearish Eurozone fundamental picture that appears likely to persist for weeks and months is a good start towards justifying a bearish EURUSD view.
The next logical step is looking at the US fundamentals for comparison.

US Fundamentals:
Bullish monetary policy

o   Interest rates are low but are expected to increase in 2015
o   Quantitative easing (printing money) is extremely unlikely in the coming months

Bullish economic fundamentals

o   Inflation is increasing and already very close to the US Central Bank’s target level
o   Unemployment is low

Bullish geopolitical problems

o   Ukraine chaos causes flow into the perceived safety of the USD
o   Middle East unrest also causes flow into the USD perceived safe haven

Bullish sentiment

o   The US is viewed as doing better economically than many of the other countries
o   Federal Reserve (FED) Chairperson Janet Yellen not talking down the USD

The bullish US fundamentals pointed to a lower EURUSD pair and therefore confirmed and strengthened the EURUSD bearish view.
Without a doubt, a comparison of the Eurozone and US fundamentals clearly point toward a weaker EUR and a stronger USD, which makes a bearish EURUSD view completely logical.
However, before shouting from the rooftops “Sell EURUSD”, it would be wise to make sure the technical (the charts) confirms the EURUSD bearish view.
EURUSD Technicals
A good place to start is the EURUSD monthly chart. This will show the summary big picture technical view and provide guidance for the one month, three month, and 1 year forecasts.

EURUSD Monthly Chart 2006-2014

The technically bearish EURUSD monthly chart shows a series of lower highs, dating back to the 2008 Global Financial Crisis. Each of the swing highs can be matched up with a significant Euro negative fundamental event.
Based upon the current fundamentals and technical, my forecasts would be as follows:

- 1 month (Sep 30, 2014): 1.3000
- 3 month (Dec 31, 2014): 1.2500
- 1 year     (Aug 31, 2015): 1.1500

These bearish EURUSD forecasts are my speculative guess based upon the fundamental and technical information available as of the August 27, 2014.
If new information confirms the bearish view (fundamental, technical, or both) then the direction of my forecasts will likely remain the same. Possibly the timing could change; meaning the targets could be met sooner.
If new information contradicts the bearish view (fundamental, technical, or both) then the timing and possibly even the direction of my forecasts might change.
My best advice is monitoring the fundamentals and technical every day. First get on top and then stay on top of what is going on.
When things are clear for you get involved. If and when you have doubts; close or cut back on your trade.