RBS Expects Large Falls in Euro and Pound

10/31/2014 9:00 am EST

Focus: CURRENCY

Adam Button of ForexLive.com shares a quote from the RBS about its outlook for this currency pair, which it predicts still has further to fall in the coming months.

From RBS:

“The EUR/USD broke below key supports around 1.2750/1.2800 (61.8% Fibonacci support of the rise from the low in 2012 (1.2043) to the high in 2014 (1.3993), and a series of lows in 2013 made around the taper tantrum in 2013) and will not feel like it can settle down until it falls towards the low in 2012.

We have seen recently a standard consolidation after a rapid policy induced fall from the highs this year in May, but the trend is clearly down. Even if we see 1.200, it will not be clear fundamentally that the EUR should more than stabilize for a period before significant new lows.
Similarly the GBP/USD has some work left to do to unwind further its strength up to July this year, and it will not be immune to a deeper fall in the currency of its major trading region EUR. Conservatively, I see 1.55 in coming months.

It is far from clear to me that the approaching yearend inclination of hedge funds and other speculators to close positions will cause a correction in the rising USD trend. I think it is important to stay with what are clear and important fundamental developments.”

By Adam Button, Editor, ForexLive.com