EUR/USD Heading To Lows Not Seen In Over A Decade - Barclays
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"We expect this EUR depreciation trend to be a multi-year one, returning EURUSD to lows not seen in over a decade. As a market consensus develops around this idea, we expect already negative hedging costs at a multi-year horizon to accelerate the EUR’s slide as long-term investors and corporates adjust their hedge ratios substantially.
We expect real interest rate differentials to continue to shift against the EUR. While recent EURUSD declines appear to have outpaced the current real interest rate differential between the euro area and the US, it has not exceeded forward real interest rates. Furthermore, we expect the real interest rate differential to continue to move in favour of the USD, beyond what is projected by market forward rates... The shift in real rates that we expect should keep EURUSD under pressure for the next few years.
Technical analysis points in the same direction. The break below range lows at 1.3475 was the first strong signal of a more significant decline in EURUSD, but the subsequent closes below the weekly cloud base suggests, like our fundamental analysis, a much large move towards 1.1210 to 1.1480."
Barclays forecasts EUR/USD to drop to 1.22 in three months, 1.17 in six months, and 1.10 in 12 month.