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Forex pairs in this Article » EUR/USD (Barcelona) - Despite the EURUSD rally on the ECB's press conference being understandable, as Draghi more or less rejected a rate cut, Commerzbank analysts were surprised with the extent of the recovery, that already printed a high at 1.3404 in today's trading: "Strong gains would be easier to explain with large EUR shorts amongst the speculative participants, which are being squared in case of good news", wrote analyst Lutz Karpowitz. "According to our model we are dealing with a mix of EUR strength and USD weakness. Approx. 60% of the rise in EUR-USD since last Thursday is due to USD weakness (dark grey bars for EUR) and only 40% are due to EUR strength", continued the Commerzbank economist, adding that a change in risk appetite played no role there, which leaves Karpowitz skeptical about the sustainability of the EUR strength and USD weakness.

"The ECB effect is likely to end pretty quickly, as described above, the debt crisis is already more or less priced out and there is unlikely to be any positive data from the EU. Continued EUR strength is far from imperative", wrote Karpowitz, expecting an affected USD as the country's main parties fail to compromise on how to consolidate the budget, which should lead to the breach of the debt ceilling.

Openly held debates as to how the Treasury Secretary would be able to prevent this situation by twisting legislation also weakens the greenback, but a stronger US economy may take over the medium term outlook. "Conclusion: moderate further USD weakness likely, but unlikely to be combined with continued EUR strength. EUR-USD might initially continue its uptrend but it is questionable whether the resistance area around 1.3490 (2012 high) really can be breached in the end", wrote Karpowitz.
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