Euro US Dollar Exchange Rate Forecast

Very difficult to tell where we go from here with the major caught in the middle of a multi-day range. Ultimately however, the overall structure remains grossly bearish with any medium-term rallies back towards the 1.4000 area to be used as compelling opportunities to build on existing short positions. The market has been chopping around over the past few weeks and we expect the chop to continue with key shorter-term levels to watch above and below coming in by 1.3740 and 1.2885 respectively.
Relative US Federal Reserve and European Central Bank interest rate expectations have had little impact on Euro/US dollar price action. Instead, markets remain focused on whether the ECB will follow in the Fed’s footsteps and enact Quantitative Easing measures in their respective economy. Soft growth numbers and almost-negligible inflation readings arguably give European officials leeway in taking aggressive measures to boost money supply. Yet recent ECB Governing Council rhetoric has been far from uniform. Some members suggest that interest rates may well go below 1.00 percent and special measures are imminent, but others see far less urgency in taking drastic action.The end result is that European monetary policy outlook remains especially uncertain, and such uncertainty has helped keep the Euro in a wide trading range against the US Dollar. Overnight Index Swaps suggest that the Euro will most likely maintain its interest rate advantage over the US dollar, but headline yields hardly paint the entire picture. It is easy to claim that the US Federal Reserve will be extremely slow in decreasing its aggressive monetary policy stimuli; the key question is whether the ECB can or will follow. Euro/US Dollar outlook could easily shift on clarification in ECB monetary policy outlook.