Nomura FX strategist, Jordan Rochester, argues that the 1.08 level would be his first target in EUR/USD
- Eurozone still needs a weaker currency to help it out
- Growth is pretty poor
- The data continues to get worse
- 1.08 is the initial target, 1.05 is when we do talk about recession risks next year
- We're not there yet but it's building up to that story
He only talks about this in the last 35-40 seconds of the video but it is a short and simple take on where the currency pair might be headed over the next few months.
The caveat to the view above though is that he says that the ECB stimulus package may help with some improvement in economic data, but he argues that it is unlikely given the efficacy of QE at zero interest rates level.
The rest of the video covers more on US-China trade talks and you get the sense that he isn't overly optimistic about the trade truce either. He notes that the next potential key focal point for risk is whether or not the December tariffs on China will be lifted as well.
Back to the EUR/USD debate, I would argue that a lot of the negativity has already been priced in at this point. However, the key thing to watch out for now is if the ECB stimulus package can bolster economic sentiment.
Should economic data continue to deteriorate in spite of the efforts by the ECB - there's a good chance of this happening - then we will go back to talks about inflation expectations de-anchoring and a possibility of a recession.
That should produce the next significant big push in EUR/USD in my view. Otherwise, with trade talks out of the way and the ECB and Fed possibly hinting at pauses towards the year-end, there may not be a significant push factor on either side for the currency pair.
