Is the Euro Headed below Parity? Yes, but 0.85 and Lower is now Possible

There is no doubt the euro is medium to long term bearish. Most traders remain bearish euro in the EUR/USD and other euro markets. There is no doubt it will continue to fall. Question is not that it will hit parity, but is how low will it go? The euro will, more than most likely, fall even further with the US Dollar strengthening by 20 to 25 percent.

Parity is already in sight and we could see the euro trading around 0.82 to 0.85 against the almighty Dollar within the very near future.

The current account surplus will only help the euro weaken even further. There is way too much cash on hand in Europe, too much savings. Combine this the impending quantitative easing program (QE) from the European Central Bank (ECB), which will inject even more liquidity into the economy, will lead to even more capital fleeing the euro and the European Union (EU).

This means the euro will continue to slide lower.

The EUR/USD is trading near a 12 year low. Price action hit near $1.06, just yesterday, and we could be testing parity very soon. On Monday, the ECB will start its QE program to stimulate the Eurozone’s stagnating economy and attempt to spur inflation higher. The US Federal Reserve, is getting ready to hike rates in the next few months. The second largest economic bloc, the EU, is getting ready to ease even further. The EU already has negative rates and now they are starting a massive QE program. This will weaken the euro considerably.

Right now, there are more foreigners invested in the EU economy than there are Europeans investing in foreign economies. This will now change. Europe needs to become a global net creditor. They need to purchase more foreign assets. Once this happens, the adjustment will be complete and they will be net global creditors. The euro will continue falling with 0.85 and possibly lower in the crosshairs.