Via the good people at eFX (with thanks to BNP and eFX):

The macro model:

  • Using BNP Paribas forecasts for the US and eurozone economies, the model projects EUR/USD will fall to 1.25 and 1.20 by end 2015 and end 2016, respectively.
  • “As the markets are forward looking, we can assume that these levels will be discounted in the spot market far earlier Thus our model’s projections are consistent with our forecasts which suggest a continued fall in EURUSD, albeit at a slower pace than seen recently,” BNPP argues.

Positioning:

  • Another factor supporting the ability of EURUSD to fall further, according to BBNP, is the still moderate level of positioning.
    “Our BNP Paribas positioning analysis shows net USD longs at +29 (on a scale of -50 to +50) which is far enough below the recent peak of June 2012 at +42 to prevent extended positioning from being a risk,” BNPP clarifies.

Technical analysis:

BNP eur usd chart technical analysis 03 October 2014
  • Technical analysis, according to BNPP, suggests that a long-term negative pattern is developing on EURUSD targeting 1.21 in coming months.
  • “A potential ten-year head and shoulders topping pattern exists on the EURUSD monthly candlestick chart, with May’s recovery peak at 1.3989 marking the right shoulder. The current slide from 1.3989 is on course to extend towards the head and shoulders’ neckline in coming months. This line connects the 2005, 2010 and 2012 lows at 1.1644, 1.1881 and 1.2047, respectively, and currently intersects at almost exactly 1.21, rising only slightly per month,” BNPP projects.
  • In line with this view, BNPP extends the target today on its EUR/USD short position from 1.25 to 1.22 and trailed the stop to 1.28.

eFX have more at that link, above