The euro is under intense selling pressure at the start of the New Year and we are not convinced that the move is over, despite the markets unwinding oversold conditions in the last few days. Following a five-month rally we suspect further weakness could trigger more stop loss selling as medium-term trend followers are squeezed out. Our focus over the rest of this week is on support at EUR/AUD 1.2405 and EUR/USD 1.2965 and the prospects for another clearout, which could deliver a return to the Nov lows.
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Barclays Capital