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A Tactical Bull Call on the EUR/USD

Analysts at Credit Suisse are calling for an 8% rally in the Eur/USD based on the perception that worries over a Euro break-up and QE will quell some of the recent fear .  Here are some thoughts via a recent note:

“Currency pairs always have two sides. The USD side of the EUR/USD had been long forgotten. The fundamental problem of the USD is the external deficit of the USA, and the lack of yield support. We think given easing concerns about a breakup of the EMU thanks to the ECB’s action, the Fed’s quantitative easing and the decline in USD funding pressure, fundamentals for the USD have deteriorated. We thus expect the EUR/USD to test the 1.35 area over coming months. As the EUR/USD becomes richly valued at this level, further gains are only likely if a new technical uptrend were to begin. As such, we expect the EUR/USD to rise to the upper end of its broad multi-month trading range of 1.25–1.35. For more information, please see our Research Alert, Foreign Exchange, “EUR can test upper end of its 1.25–1.35 range,” published on 29 October 2012.”

Source: Credit Suisse

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