FXStreet (Barcelona) - Kit Juckes, Global Head of Currency Strategy at Societe Generale, sees the likelihood of a rebound in both GBP and the EUR.
"The conditions, therefore, are ripe for a euro short-covering bounce. The speculative market is short; EUR/USD has been falling despite tightening peripheral spreads, and looks too low in the short-term on regressions of spreads and rate differentials."
"Month-end FX reserve re-balancing is also a possible trigger for a bounce. Indeed, there's even talk of SNB euro buying at these levels of EUR/CHF."
"And finally, as a potential catalyst, there's a chance of positive economic news from German unemployment and Euro area money supply today. All in all, reason enough to think a bounce is possible. Only a correction through 1.340 would break the current downtrend and excite technicians, and the more modest the bounce, the worse the technical outlook."
"The lack of fresh news also opens up the possibility of GBP/USD bouncing a bit further today, with CBI distributive trends the only data of note. As observed yesterday, GBP weakness has been more about long positions being cut than shorts being built, and this too argues for a modest bounce."