EUR USD (1.3245) The euro delivered an impressive performance yesterday. It broke out of the range set over the last two weeks and reached the highest level this year. Given that on Monday traders attempted to push the euro out from the congestion towards the downside, one must therefore interpret a tone of a short squeeze in the euro. Some observers are not shying from linking the euro’s strength to cautious almost reluctant optimism about Greece. While EU’s Maria Damanaki saw Greek’s exit from the eurozone as a ‘real alternative’ yesterday’s news also delivered a relatively sanguine German chancellor who said she does not want Greece to leave the euro as an exit posed ‘incalculable risks’. The Franco-German proposal to delink the Greek bond payments from the larger issue of default also is probably being perceived in the markets as a reasonable path to follow as far as stabilising the markets is concerned. Developments inside Greece also suggest that the Greek PM is putting finishing touches to a draft about the bailout agreement to circulate it among his political colleagues. From the US investors received signals that Bernanke is loath to change his dovish stance. He reiterated that the ostensibly remarkable jobs data does not paint the complete picture of labour participation where long term unemployment is still an issue. QE3, it seems, is still on his agenda and tightening interest rates look comfortably distant, in late 2014. Our price target for the bullish strategy remains at 1.3395. The risk limit is now higher at 1.3090.
Click here to read the full report: Daily forex 020812
Deutsche Bank