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Forex Flash: Recent drama reflects ongoing need of ECB for action – UBS

FXstreet.com (Barcelona) - Despite all the reasons and evidence to the contrary, markets are not willing to aggressive sell the euro yet. The structural impediments and the less than 'whatever it takes' attitude assumed by the ECB with regard to Cyprus were clear, but perhaps most investors know that Cyprus is still a special case in some respects and the ECB is simply keeping its powder dry. However, “this also means that when true problems do occur, the ECB will need to act with full force and by then markets would have already started to price in significant problems.” notes Gareth Berry, a Research Analyst at UBS.

As such, barring a sudden growth surge, we continue to expect the euro to trade in an asymmetric fashion - limited upside when there is marginal good news, but a lot of potential downside if clouds gather. Credit and funding markets will lead the way - but once OMT or other liquidity instruments counter these asset classes, the burden or risk pricing will fall on the euro. Of course, currency intervention outright is always an option, but we'll leave that discussion for another day.

Forex Flash: US 10-year treasuries continue sideways trading – RBS

The market continues to see a 1.75% to 2.15% range in 10-year US Treasuries. According to the RBS Research Team, “Key resistance remains 2.15% in 10-years, while the near-term support is 1.83%. Our bias remains to modestly lower yields in the near-term, though confidence in our abilities to "all even minor moves in this environment are ebbing as the dominant rate trend remains sideways.”
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Forex Flash: EUR/USD year-end target at 1.27 – Scotiabank

The demand for the shared currency remains subdued on Tuesday, anchored around the mid 1.2800s, as the spectre of Monday’s grim comments by Eurogroup Head J.Djisselbloem is still hovering over the markets....
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