hello,
On Friday (17th January) showed up an interesting note from Goldman Sachs relating current issues of the situation on EUR/USD. Thomas Stolper (GS) indicates a problem with offsetting forces squeeze EUR/USD into a narrow range.
"How often do we hear that EUR/$ will have to weaken because the Fed tightens before the ECB? Well, policy rates are very close to zero and the tapering, i.e., slowing balance sheet expansion by the Fed, has not materially changed the rate differentials even at longer maturities.
With a few exceptions, cross-country correlations in interest rate differentials remain very high. The gap between the Dollar and the Euro, for example, has remained within the same range since June. And that is true for all maturities from 2 to 10 years.
To be fair, EUR/$ rate differentials have recently moved a little bit against the EUR, but the relative current account position remain supportive of the EUR. As a result, we continue to see two offsetting forces squeeze EUR/$ into a relatively narrow range, a situation that could persist." said Thomas Stolper, GS.
With a few exceptions, cross-country correlations in interest rate differentials remain very high. The gap between the Dollar and the Euro, for example, has remained within the same range since June. And that is true for all maturities from 2 to 10 years.
To be fair, EUR/$ rate differentials have recently moved a little bit against the EUR, but the relative current account position remain supportive of the EUR. As a result, we continue to see two offsetting forces squeeze EUR/$ into a relatively narrow range, a situation that could persist." said Thomas Stolper, GS.
Regardless of the above conclusions overcame significant resistance, and it seems that the 1.33-1.32 is most possible.
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| chart 1. EUR/USD H4, 2014-01-19 |
regards,
oscarjp
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