Updated November 2017: This Forecast Seems to prove correct. We will update with a 2018 forecast later on.
In the meanwhile we invite you to read our analysis of the Sterling to Euro Rate Drop In The Last 20 Years.
The Euro… 2017’s Phoenix?
A Special 2017 Euro Prediction and Analysis
Several years ago and in the middle of the Eurozone Debt Crisis, most analysis thought the Euro to be a doomed currency condemned to disappear in the very near term. With countries such as Greece, Portugal, Spain, Ireland, Cyprus, Hungary and even Italy in financial trouble, the Euro behavior predictions were pessimistic and it seemed that things would not stand and the whole castle would collapse. The Euro forecast at that time brought only doom and gloom.
Looking at the EURUSD graph, we can see that starting 2008 the Euro initiated its downward slide falling from a record high of 1.60 into a level of 1.05 by early 2017. It was hard to predict how far would this behaviour go.
Nevertheless, we are noticing early sign of a pattern reversal. Not only do these signs clearly appear on the graph above but a reversal makes a lot of sense also from a fundamentals perspective.
The Technical Approach
Researching on the Internet about technical analysis, one usually finds tons of resources, experts and self-proclaimed guru’s that know the EUR/USD forecast for 2017 and in theory should help you make millions… but are things that easy and straightforward?
While nothing is impossible, one needs to dig deeper and keep in mind the competitive nature of the industry. The technical analysis definitely helps in setting theories that one needs to validate through a fundamentals analysis focusing on the most important rate determining factors.
So, let’s look in more details into the EURUSD graph and try to deduce what the future brings and what is the Euro prediction for the rest of 2017. The first look gives us the impression of dealing with Russian mountains. A clear upward trend between 2002 and 2008 followed by a downward trend. Now zooming on the 2008 – 2015 period, we can see that various rebounds took place though none of those rebounds was able to shift the trend.
The following is very important and needs to be kept in mind: A rebound never changes a pattern. In order for a pattern to change, there is a needed “stagnation” period that enables perceptions to change, mentalities to turn bullish and confidence to get back. So, between 2015 and 2017, the Euro has been quite stable and the EURUSD has been trading within a relatively narrow range (1.05 to 1.15). Will this trend continue into the second half of 2017? Is this the right forecast for the Euro’s behavior?
Again, looking at the graph, we can confirm our rule. Between 2000 and 2002 a similar stabilization phase enabled to change a downward sloping pattern and initiate a bullish Euro run that lasted till 2008.
According to most market analysts, the economic landscape is turning way brighter in Europe. Economic Data for the second quarter of 2017 is considered very positive as unemployment kept on decreasing, economies grew and positive sentiments arose all around. What is more convincing is the fact that growth is not getting concentrated in one industry or one country, but is rather dispersed in a homogeneous manner among industries and Eurozone countries.
As a logical consequence, most economist increased their consensus forecast for Eurozone growth in 2017 from 1.4% to more than 1.7%. At the same time unemployment is reaching lows at 9% (down from 12% in 2013). According to Mario Draghi, Head of the ECB: “The Eurozone’s economic recovery is increasingly solid and faces fewer risks”. This is a very positive prediction for the Euro, in opposed to the years before.
From a political perspective, the election of Emmanuel Macron in France has shown that European prone leaders are still favoured in spite of Brexit in the UK. This is really key as many political commentators were worrying about a breakdown. At the same time, there seems to be a very strong cohesion among European leaders and unity seems to have become very important.
As a matter of fact, it seems that Brexit, which made the GBP one of the volatile currencies in 2016, has contributed to unify Eurozone countries by making leaders understand the importance of working closely together in order to avoid catastrophe scenarios mainly favoured by populist & nationalist political parties.
Taking into account all the elements discussed and analysed above and other Euro predictions for 2017, it is clear that the Euro is a Bull and that going long the EURUSD pair can enable to make massive profits. As a matter of fact, we believe that Euro’s appreciation would be even more pronounced versus the British Pound. As uncertainty and risk is going to be facing UK’s economy following Brexit and as Europe’s economy is successfully recovering, we would advise to Buy Euro and Sell GBP. Our view is strong and holds for the long term.
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