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#1 02-12-2019 08:49:07

johnedward
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From: Paris - France
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EUR/USD: Goldman Sachs explains why euro should climb in 2020

EUR/USD: Goldman Sachs explains why euro should climb in 2020


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The short-term trend is uncertain on the eurodollar, as the pair has been drawing a triangle of hesitation for the past few days.

It should also be noted that the 100-hour moving average is displayed as an immediate resistance at 1.1010, while the psychological threshold of 1.10 is the first key support level to keep in mind.

If bulls attempt a breakthrough above the 100-hour moving average, the 200-hour MA at 1.1037 could be targeted, ahead of 1.1050, followed by the 100-day moving average at 1.1075 and the psychological threshold of 1.11.

For the time being, however, the trend remains uncertain. But this could change next year according to a recent Goldman Sachs report.

The bank's analysts believe that the pair will rise towards the end of 2020, mainly due to a series of key factors.

First, the single currency would be undervalued by 15% according to their models. This undervaluation is largely due to the fact that the euro area continues to have a surplus in its balance of payments (thanks to exports exceeding imports).

Secondly, the seller's positioning is already very high on the euro: "Leveraged funds have had a short EUR/USD position of at least $10 billion per week over the past year," says Zack Panda at Goldman Sachs. When markets are heavily engaged in unidirectional betting, the prospect of a sharp and significant reversal increases as these bets are closed.

Thirdly, it does not seem feasible for the ECB to lower interest rates much further from current levels. (As a general rule, when a central bank reduces interest rates, the currency it issues decreases. As a result, the ECB's already very low minimum rates no longer act as a brake on the euro).

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