Deutsche Bank on EUR/USD:

EUR USD (1.3590)

Yesterday’s US CPI number was thecatalyst for another short-squeeze in the euro. As mentioned in ourlast report, many short-term traders currently entertain the idea oftrying to pick a top for the single-currency. Their principal motivationfor doing so is its proximity to its all-time high, but few like to admitthis, especially as there are few other fundamental justifications.Mercifully, this fact might have limited the degree of short-selling andspared some traders some nasty losses. As a consequence thesqueeze only lifted the euro some 50-pips higher on the news.However, we doubt that the development has calmed the appetitefor short-selling. Still traders claim that the rally has been ‘too far, tofast’. Too fast? The euro is only up 5 percent from its year-lowregistered in January and implied volatility remains pitifully low. Itspent the three weeks prior to the Easter break in a sideways range.In fact, only in the last six sessions has the EUR/USD evenapproached the historical averages in terms of price-range. Thisobservation alone reveals the time-horizon of the current sceptics.

Our current upside objective remains at 1.3670. This is fractionallyabove the all-time high – a level where top-pickers are likely to beactive. But they will be the only source of supply. Thus, beyondthere, a further squeeze should lift the single-currency to 1.3920. Tothe downside, the risk-limit for our bullish strategy should now betightened to 1.3505.