The largest tailwind for the commodity bull market is set to continue according to FX analyst Kit Juckes at Societe Generale. Juckes believes the Euro is headed back to 1.55 EUR/USD:
“When the dam breaks you get washed out. Taking out position concentrations is a favourite sport in a range trading environment and the world is certainly heavily USD short. As the Fed stays on hold more than is currently expected, EURUSD is likely to once again overshoot and head for 1.55, the top of our now higher EURUSD forecasts.
Juckes sees the current dip in EUR/USD as a buying opportunity as the Fed is likely to remain tight, the German economy strengthens and the European sovereign debt crisis doesn’t cause any significant economic disruption:
“EURUSD is likely to once again overshoot and head for 1.55. Current dip is providing buying opportunities for the EUR against USD as:
- The Fed stays on hold more than is currently expected.
- German economy is booming despite the level of the euro.
- Euro’s fate will depend on how the ECB reacts to developments in the center vs periphery. Assuming peripheral risks stay constant this is bull euro.
- Forecasts revised: EURUSD now at 1.52 by year end (from 1.50)
- Main near-term threat: Uncertainties over ECB’s near-term policy tightening and Greek debt fears haunt the euro. Violent short-term moves in EURUSD (in one direction or the other) cannot be ruled out.
- European currencies: No reason to own the euro relative to the Norwegian and Swedish krone. EUR/GBP profile does suggest you can only be a GBP bear for a little longer.”
Source: Societe Generale
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.
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