JP Morgan maintains a bearish outlook on the EUR/USD currency pair as European growth data continues to weaken. The trend of declining growth has become more pronounced and is now evident in hard data, reinforcing the bank's negative stance on the euro. Surprisingly, despite these challenges, the currency has remained resilient in the face of adversity.
The latest Purchasing Managers' Index (PMI) figures show a significant drop, particularly in the services sector, which has caught up to the already depressed manufacturing sector. Furthermore, the positioning in EUR remains high, suggesting there is room for a further reduction in long positions. These factors contribute to JP Morgan's belief that the euro may face additional downward pressure.
A multitude of signals, including the EASIs (Economic Activity Surprise Indices), PMIs, IFO (German Institute for Economic Research), and continuous downside surprises in China, point to deteriorating growth prospects. JP Morgan's economists have also downgraded growth forecasts, adding weight to the overall bearish sentiment in the market. These factors continue to drive JP Morgan's negative outlook for the EUR/USD pair in the second half of 2023.
Despite the currency's resilience, JP Morgan reaffirms its bearish bias for the remainder of 2023. The bank sets its target for the EUR/USD pair at 1.05, reflecting the ongoing growth divergence and the challenges faced by the euro. However, JP Morgan does anticipate a potential recovery in the currency pair post-recession in 2024, with a target of 1.20.
For Forex and crypto traders, JP Morgan's bearish outlook on the EUR/USD pair carries significant implications. The weakening European growth data and the persistently depressed PMIs suggest a potential decline in the value of the euro against the US dollar. Traders may consider adjusting their positions and reducing longs in anticipation of further downward pressure on the euro. However, it is important to stay vigilant and monitor economic indicators and market developments closely, as unexpected events can influence Forex markets and alter trading strategies.