Forex Flash: EUR/USD “bubble” to continue today - Commerzbank

FXstreet.com (Barcelona) - Commerzbank analysts call the recent EURUSD rates as a "bubble", but state that such thing is not a sign of irrationality: "Research has shown long ago that bubbles are compatible with perfectly rational market participants", wrote analyst Ulrich Leuchtmann, adding that fundamental factors will only play a role for EUR-USD if they have an impact on the probability of the bubble's bursting. "The fact that markets simply ignored the surprising US data in the last few days is a good example", he concluded.

As the euro gets increasingly perceived as fundamentally overvalued, the appreciation trend will accelerate, compensating speculators, who bet on a continuation of the bubble for the risks they take. "It is impossible to determine price targets from our fundamental vantage point", Leuchtmann said, but some statements can be made: "As long as the ECB is the only major central bank which can siphon off liquidity (thanks to recovering capital flows into the peripherals) and as long as the Fed (and in all likelihood the BoJ and the BoE, too) continues to pursue an expansionary monetary policy, there is no sign of an important exogenous factor which might burst the bubble", continued the analysts, adding that "as the FOMC did not say anything about an exit from QE3 (admittedly, it was not likely to; see above), EUR-USD will probably continue to go up today".