EUR/USD could drop towards 1.02 and reach parity with the US dollar, according to a Nomura analyst. This prediction is dependent on oil prices not experiencing a drastic collapse. The analyst also noted that recent US yields and rates suggest EUR/USD should already be at 1.01 to 1.03. If oil prices reach $100/bbl to $110/bbl, the Euro area could see their currency weaken further as they heavily rely on energy imports. The analyst suggests that the recent zigzag pattern in EUR/USD may finally be transitioning into a more definitive trend.
The main risk to this lower EUR view is if US data starts to come in soft and US yields cease climbing. However, the recent avoidance of a US government shutdown supports the US dollar. With the shutdown averted, upcoming data such as non-farm payrolls and jolts data will be released, and government workers will not be laid off. This development alleviates concerns that jobless claims would spike, making it difficult for the market to buy the dollar.
On the EUR/USD daily chart, it remains to be seen whether the currency pair has formed a clear downtrend or has broken out of its range. The opinions of ForexLive commentators are awaited to provide further insights into the situation.