John Taylor, Gabriel de Kock Predict Euro Falls to 1.20 and 1.25 (FX Concepts, Morgan Stanley)

John Taylor, founder and CEO of hedge fund FX Concepts, and Gabriel De Kock, Executive Director of FX Research at Morgan Stanley, both said a few weeks ago during interviews that they thought the euro (EUR/USD) would fall to 1.20 and 1.25. I transcribed a portion of the videos below. Below is also a chart of EUR/USD going back to 3/2010 with longer-term trend lines and resistance levels. 1.40 looks like ceiling resistance EUR/USD needs to break, and then you can see the new downtrend line when using the May and August 2011 lower highs. EUR/USD just went from a low of 1.314 on 10/4 to a high of 1.391 on 10/17. Nice move. John Taylor's "conservative" 1.20 target for EUR/USD is around June 2010 support.

EUR/USD since March 2010 (courtesy FreeStockCharts.com)

John Taylor on Bloomberg TV, 10/11/2011 [not from an official transcript, click for video]
"In the near-term I believe that Greece has to default. Whether it's called a haircut or whatever, Greece needs to be completely restructured. And the banks need to be recapitalized (he thinks Greece will stay in the Euro-zone)."
"I think the dollar is going to move higher because of this de-leveraging in the world and the fact that both the Euro and the U.S. will be going into a recession. Surprisingly enough, that's good for the dollar because the U.S. banks aren't lending out more dollars, they're being reluctant and pulling their money back. And so many people are already short the dollars that they're forced to repay their loans."
"I think now I'm feeling more conservative in saying that the Euro is going to go to 1.20 by the end of the year. But I would be surprised to see the euro hold above 1 (parity) through this crisis. And it's not over...."

Gabriel de Kock of Morgan Stanley on CNBC, 10/4/2011 [not from official transcript, click for video]
"I believe that the move down to the 1.33 level was well justified over the last couple of days. We have seen that the European Finance Ministers came up with absolutely nothing. In addition to that, Dexia was just an example of the capital shortage that you're seeing in the banking system in Europe. And consequently, we are still looking for the euro to depreciate significantly from here."
"Our formal target for March is 1.25, December 1.30. However, we believe that we could fall below the 1.30 level in the meantime as the european struggle towards coming up with a solution for their problems which is a) to get more clarity on Greece, b) to recap the banks, and c) to get a credible backstop for the bond market."
"We believe that we could see our March target well before the end of this year, however, we are very wary that towards year end we'd see a repatriation of funds by the banks similar to what we saw in 2008. And that would give the Euro a boost towards year end; that's why are our year end target is 1.30."

Chris Wood of CLSA on CNBC-TV18 (India), 10/14/2011
"We remain tactically cautious on the euro and on commodities as the rally in the dollar driven by deleveraging is not over."

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