In the past 24 hours, EUR/USD has once again fallen around 100 pips. EUR/USD downtrend started in June and since then it has fallen around 1000 pips. The important question is how low can EUR/USD go? Market analysts are saying the EUR/USD can hit 1.1000 level in the next 12 months.
“The euro is vulnerable to a serious hit,” analysts at Barclays said in a note Wednesday. “We now expect a large, multi-year downtrend in the euro, following a substantial deterioration in the euro area’s economic outlook and the ECB’s (European Central Bank) aggressive response to that deterioration.”
With ECB QE in place and the interest rates all set almost close to zero and USD getting strong, you should expect a strong multi year downtrend.
Draghi and his colleagues at the ECB are likely cheering as the euro falls. While the market appears to be losing faith in the ability of the bank to spur inflation, the falling euro will come as a welcome relief to exporters and policy makers. There is even talk that Draghi will follow in the footsteps of BoJ Governor Kuroda by essentially engineering a fall in the common currency, as it could be the last option left to the bank to fight deflation.