What to expect from EUR/USD for the next 12 months

The forecasts from the largest banks for the most traded currency pair in the world - EUR/USD - signal a future of uncertainty. As can be seen from the chart below, there are barely two similar forecasts for the next 12 months of the world's 5 largest banks. Citigroup expects that the EUR / USD will rise to 1.26 by the end of Q2, after which it will continue to rise steadily until it reaches 1.31 by the end of Q1 in 2019. The greatest contrast with them is found in Saxo Bank's forecast, which predicts a sharp decline by the end of June to 1.03.

Looking at the fundamental in the pair - what has the greatest impact in the pricing of a currency are interest rates. At the moment, US interest rates are 1.75% and the European Central Bank is just starting to rise, staying steady at 0%. So based on that, Saxo has a solid ground that the dollar will grow. According to analysts' expectations, and the dot plot provided by the Fed, the Central Bank of the United States will raise interest rates at least twice this year + 1 in 2019. This will undoubtedly support the greenback, especially against a competitor whose interest rates are 0%.

As can be seen, according to traders, the Fed's chances to raise interest rates again in June are 73.6%, then the chances for a December hike for a third time this year are 41.3%. These positive expectations will begin to accumulate in the dollar, and Donald Trump's attempts to curb the trade deficit against China will further support the greenback.

From a technical point of view, the EUR / USD chart on a weekly time span speaks for itself. Clear declining trend since 2008 - the last financial crisis. Over the period of mass selloffs on global markets, the dollar has taken precedence over the common currency. The price is currently on diagonal resistance combined with another diagonal trend line and 38.2% Fibonacci - strong levels of resistance. With all the speculation that the next financial crisis is around the corner - the dollar has another reason to be favored by investors.

Whether Saxo Bank's forecast will be fulfilled or not is something that only time will show. Of course, there are many questions about the future of the currency pair. Despite his words, Trump's intentions are to keep the dollar low, so the stock markets can win - Barclays, Bank of America Merrill Lynch and Wells Fargo also seem to be betting on it.

But at least for that moment - the technical analysis speaks for a decline - as long as the resistance holds to the test. On a daily chart, the price is in consolidation in a desperate attempt to find a direction against the backdrop of all worries about trade war and pressure on technology companies. If the resistance survives in the coming months - we will have enough prerequisites to look for short positions with the long-term trend.

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