We are concerned by the recent widening of some eurozone spreads such as those of Italy and Spain vs Germany. Although these spreads are well away from the peaks seen earlier this year, the risk is for near-term pressure to remain on the EUR. Given the sharp run up in EUR/AUD and EUR/CAD seen over the past week, we expect these markets to stabilise to unwind some of the overextended momentum readings. On the other hand, a Reversal week in CAD/JPY also points to further corrective risks on JPY crosses.
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Barclays Capital