EUR/USD: The pair could fall to 0.95 faster than expected says Goldman Sachs, who says shorting the EUR/USD tops its list of 2016 recommendations

On the occasion of a recent note, Goldman Sachs announced that it placed the sale of EUR/USD at the top of its list of 2016 trading ideas:

Strategic reasons

"We expect a 10% increase in the USD vs the EUR and we put a stop at -5%. This trade is clearly the expression of the divergence in monetary policy between the Fed and the ECB, which should remain a dominant theme in 2016. As the US economy approaches full employment, the Fed is preparing to distance itself from its zero interest rate policy, while the ECB plans to increase monetary easing."

Tactical reasons

"Tactically, and in the shorter term, we also recommend shorting the EUR/USD in the month of December, a month where it is almost certain that the Fed will increase its rates, while the ECB will increase its QE. Our economists expect the ECB to lower deposit rates by -0.1% and to extend QE by 12 months, which would be bad for the EUR.
Goldman Sachs' EUR/USD forecast

"Our 12-month EUR/USD forecast is at 0.9500, but we believe there is a good chance that this threshold will be reached before given the strong likelihood that the ECB will decide to ease again in December."