Currency Analyst since 2010

USD is still in the bullish Super Cycle

Analysts at Morgan Stanley have analyzed the moves of the USD during the past 40 years (REER – real effective exchange rate; NEER – nominal effective exchange rate: these are trade weighted indexes adjusted and not adjusted to inflation) and came to conclusion that there have been several bullish and bearish super cycles during this period. The average duration of such super cycle was about 7 years when USD moved by nearly 48% versus the currency’s of America’s main trade partners.

According to Morgan Stanley, USD is now in the middle of the third USD super cycle. US currency will strengthen further because of the strong US economic prospects compared to the outlook for other economies and the increasing investment flow to the US. The specialists expect that USD will rise by about 6% in 2015 and same at 2016.

The outlook for EUR, on the contrary, is bearish because of the ECB’s QE and the previous monetary policy measures. The single currency will weaken because of portfolio outflows, the use of it as a funding currency and central banks’ reserve reallocation.

Morgan Stanley has a SELL LIMIT on EUR/USD at 1.1500 targeting 1.0900 and will stop at 1.1650.

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