Forex or foreign exchange tends to be a volatile market where anything can happen. With the volatility comes a variety of opinions, and with opinions come investment and trading. The EUR/USD happens to be the most traded currency pair. So, let’s take a look at where the majority of high end banks see the euro go against its archenemy – the United States dollar. Digesting the picture we see the following projections from the leading banks:
On average the biggest 70 or so banks expect the euro to continue fall in the long term future. After a short rise in the 3rd quarter the euro is projected to drop back to 1.23., thereafter continuing dropping to 1.20 through 2nd quarter of 2011. Nonetheless, the opinions tend to vary. So let’s digest the information. In the 3rd quarter, the highest projection for the euro is to rise to 1.40, while the lowest projection for the euro is to drop to 1.13. The latter scenario is quite unlikely at the current juncture. Credit Suisse expects the euro to rise to 1.28 (most probable scenario), Barclay’s expects a rise to 1.26, JP Morgan expects a reading of 1.25, Societe General sees a drop to 1.20, while Morgan Stanley is short to 1.18.
Projecting currency movement past two quarters becomes relatively hard as abundant market information has not yet originated. Forecasting past two quarters is like being Nostradamus, some might believe, but not all are convinced. So lastly let’s look at the projections for the remainder of 2010. On average the banks anticipate the euro to drop to 1.23. The maximum projection calls for a rise to 1.43, while the most pessimistic projection calls for 1.08 (sovereign debt issues in mind?). The extremes are fun to watch but never tend to be right. Case in point, look at them as extreme political parties on the left and on the right. Regardless, Credit Suisse expects a rise to 1.3150 (again most probable), Barclay’s sees a rise to 1.28, JP Morgan is not a foreteller (keeping the projection at 1.25), Societe General expects 1.20, while Morgan Stanley continues its bearish projections at 1.16.
Quantifying fundamental analysis into figures is hard to do for currencies, while it is easy to do for equities. Therefore, your humble writer will refrain from giving a specific figure. In my opinion, the euro will continue to inch up further as long as no new sovereign debt issues arise in the eurozone and the United States economy continues to underperform. So in a nutshell, I tend to agree more with Credit Suisse on this one (no pun intended).
Disclosure: No positions