Commerzbank Says Euro to 1.2755 by April, a 6% Decline

by on January 8, 2014 4:23 pm BST

The euro has struggled against the dollar after failing to surpass 1.3813, according to Citigroup recently.I, your humble analyst, also indicated euro’s troubles if this mark was not closed upon numerous times, including “Euro Gets a Push from Weidmann, Is 1.4000 in the Future?” on December 27. The EURUSD also came close to the near-term target of 1.3550,

However, Commerzbank AG is taking it a step further and predicting a six percent drop to 1.2755 by April 2014. Commerzbank’s head FX technical analyst Karen Jones said “the pressure from the euro up-move is waning.” And it has for sometime going into the new year. “The long-term move that the euro has had since the middle of 2012 is likely coming to an end now,” Jones continued. A lot of the chatter comes from the fact that the Federal Reserve and European Central Bank (ECB) policies are diverging.

The daily chart showed a triple-top with peaks on October 25, December 11 and 27. The price action began to rollover ever since the massive short-squeeze that hit 1.3892 and quickly sold off. Currently, the pair found support at 1.3570 but is being contained within the 50 and 72 EMAs.

A break below support, and the 72 EMA, the EURUSD will trend lower to 1.3525 and then to 1.3500, which will likely serve as minor support areas. A correction upward is most likely be capped at the 50 EMA, or 1.3625/30.

If the dollar continues to garner strength, the euro will undoubtedly head lower. Dollar futures are modestly high but have rallied into 2014. Price action broke the daily 200 EMA, which will likely serve as support. At 81.17, 81.25/30 is the nearest resistance point, and a follow up analysis will be provided once broken.

1D Chart of EURUSD

1D Chart of EURUSD