Goldman Sachs believes EUR/USD is likely to be headed toward 1.36 - 1.40

Thomas Stolper, chief currency strategist at Goldman Sachs, said this in an interview:

"The sovereign debt crisis has helped generate concerns - deeply affecting the markets - regarding the political viability of the Euro Zone. Many investors have opened hedging positions, often in the form of EUR / USD positions.

Since the beginning of the announcement of the OMT program by the ECB, the need for such coverage has decreased and the risk premiums of many assets in the euro zone have declined since July 2012. Although the process is not exactly smooth, as evidenced by recent tensions in the euro zone, we think this process will continue.

Several benchmarking exercises suggest a likely move towards the 1.36 to 1.40 range, however at these levels, a response from institutions and ECB leaders will become more likely.

In contrast to the situation in the U.S., relatively speaking, this is positive for the EUR / USD. These factors, particularly the deflation risk premiums in the euro zone suggest that the pair will stabilize around 1.40 over the next 12 months.

In addition, Euro Zone crisis movements linked to other European currencies will likely dissipate over time."