While EUR/USD has risen by over 5% so far this year, the exchange rate is still undervalued according to an analyst at Goldman Sachs. Analysts at Goldman Sachs believe EUR/USD is in a good position to benefit from a continued sell-off in the greenback.

The dollar index, which tracks the greenback’s value against majors, has declined by 10% over the past six months. According to the investment bank, the currency pair’s fair value is 1.30.

The ECB met last week and there was little that rhymed with ECB Chief Economist Lane outspoken concerns about the strength of the euro. Lane stated that inflation has been “significantly muted” by the stronger exchange rate, a step up from the remarks he made at the start of this month that “the EUR/USD rate does matter”.

On the other hand, many economists predict Federal Open Market Committee members won’t take any new actions when they wrap up a two-day gathering on Wednesday, an outcome likely to embolden bond bulls and further crimp inflation expectations. Fresh projections for the federal funds rate — bumped out a year to 2023 — are expected to show rates hammer locked at zero, something traders have mostly priced in already.

“The market definitely needs more from the Fed now,” Aneta Markowska, chief U.S. financial economist at Jefferies said. “The Fed will be undershooting on inflation for the better part of four years, so why wait to do more? And inflation expectations have already been fading.”

 The next focus will be on the Eurozone Industrial Production for July, scheduled for release at 09:00 GMT. The data is expected to show the factory output rebounded by 10% month-on-month in July, following June’s 9.1% rise.

EUR/USD 4 Hour Chart:

Support: 1.1812 (S1), 1.1779 (S2), 1.1748 (S3).

Resistance: 1.1876 (R1), 1.1907 (R2), 1.1941 (R3).

Amidst all the catalysts creating positive sentiments for Euro against the dollar, we expect a bullish trend for EUR/USD.