EUR/USD: Plus One Big Figure; Next Week’s Range &

EUR/USD has had some wild rides and seems to emerge as winner, or at least make a significant rise from the abyss it fell to.

Is it set to resume its falls or has it a potential for more rises. Here is the view from BTMU:

Here is their view, courtesy of eFXnews:

The following is EUR/USD range and outlook for next week as provided by Bank of Tokyo-Mitsubishi UFJ (BTMU).

EUR/USD – BULLISH BIAS – (1.2550-1.2950)

Based on our short-term models that have as key components movements in short-term yield spreads, the dollar is looking a little stretched versus the euro and is perhaps why we had the large-scale liquidation of long dollar positions versus the euro yesterday. So in that sense, we are inclined to stick with our bullish view for EUR/USD for another week. Additionally, in an acknowledgement to the notable upturn in volatility over the last few days, we have also widened the range for the week ahead from 3 big figures to four.

That may still prove too narrow given our sense that the current price action may be a signal of an even larger move just around the corner. If there was a major move, it is more likely to be renewed dollar strength and EUR/USD breaking lower as asset markets sell off further and risk aversion becomes more pronounced. There may also be nervousness in the financial markets in Europe next week ahead of the ECB stress test results of the banks on 26th October.

We advise readers to keep a close eye also on the periphery sovereign debt markets. The liquidation of momentum trades, evident yesterday, could spread to the biggest and longest momentum trade of them all – the buying of periphery sovereign debt after the OMT announcement in 2012. A squeeze of that position could really damage sentiment, although given our bias, we are not assuming that becomes an issue in the week ahead.

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