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27 Feb 2013
Forex Flash: EUR/USD to test 1.30 – Societe Generale
According to SG's FX Strategists: “A sharp short correction seems to have changed the market’s psychology for institutional investors. It sees itself potentially overextended and is now switching to a mentality of selling on rallies to reduce its risk profile. For now, it means mostly risk management,” the analysts say.
“Risk management does mean reducing USD shorts and some Euro long exposures. We have an Italian 10 year bond at 5AM EDT and a few weeks of political uncertainty as Berlusconi’s attempt to form a coalition are rebuffed,” they expand, adding: “These and a large scale widening of spreads between the periphery and core of Europe are the ingredients for the market to test the 1.30 and probe in the coming weeks a break to the 1.20-1.30 range, earlier than we had expected,” SG FX team conclude.
“Risk management does mean reducing USD shorts and some Euro long exposures. We have an Italian 10 year bond at 5AM EDT and a few weeks of political uncertainty as Berlusconi’s attempt to form a coalition are rebuffed,” they expand, adding: “These and a large scale widening of spreads between the periphery and core of Europe are the ingredients for the market to test the 1.30 and probe in the coming weeks a break to the 1.20-1.30 range, earlier than we had expected,” SG FX team conclude.