On November, 20th 2019, we recommended investors should BUY the EUR at 1.10 against the US Dollar in a post titled SELL THE US DOLLAR .
Our fundamental thesis was that we were completing a major and complex top in the secular USD bull market that started in 2014 and indeed the EUR rebounded to 1.12 over the next few weeks.
In the past couple of weeks, the US Dollar shot up strongly as part of this major complex top, taking the EUR / USD rate to 1.08 where it trades right now.
The real surprise in the complex top USD rebound scenario has been the broad-based EUR weakness of the last 2 weeks, which caused an overshooting in the DXY Index although the broader USD mostly traded sideways.
Pattern-wise, the EUR selloff is clearly exhaustive, and it is our belief that the EUR trades in the late stages of its decline. More importantly, with the EUR trading at important retracement levels against a number of key pairs (USD, SEK, AUD, RUB, CAD) we see the EUR very close to a significant reversal.
EUR / USD daily chart
EUR / USD weekly chart
EUR / USD monthly chart
As the weekly and monthly charts show, the EUR/USD trades at a significant long term support levels from which it should clearly bounce and mark a higher low after the 2016 low.
We are clearly sticking to our 2020 core scenario to see a major EUR comeback into the second half of the year.
Our bullish EUR view is based on our bond market expectation, where into March we expect the Q1 pullback in German yields to form a major higher bottom as the basis for a big bounce in yields into the summer.
We see the EUROPEAN CENTRAL BANK under the stewardship of Christine LAGARDE to depart from the negative interest rates policies of her predecessor and expect a re-normalization of interest rates in Europe at a time where US interest rates will remain low.
The initial target for the next move is 1.1750