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EUR/USD: Short-covering bounces to be modest - Westpac

FXStreet (Bali) - According to Westpac FX Strategists, short-covering bounces in EUR/CHF are likely to be modest, also noting that their one month target is set at 1.2750.

Key Quotes

"The heaviest net short EUR spec positions since Jul 2012 should at least slow the pace of EUR/USD decline, given that mid-2012 was when EMU sovereign risk was still the key debate (the OMT bond backstop was announced Sep 2012)."

"The ECB’s surprise rate cut and less surprising promise of ABS purchases in Oct have produced sharply lower trading ranges but this week should not be nearly so dramatic."

"Any fresh short EUR positions will require patience, but with many investors assuming large scale QE is only a matter of time, short-covering bounces are likely to be modest, perhaps low 1.3000s at most. One month target 1.2750."

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