Morgan Stanley strategist says the US dollar could see a bounce correction
- "but this is still within a longer term bearish trend"
Says risks for the week ahead include:
- Germany's SPD coalition vote on Sunday
- NAFTA talks
- World Economic Forum
Projects EUR/USD could trade toward 1.17 if no agreement is made with SPD to continue coalition talks in Germany
- says CFTC data show positioning getting more long in euro thus more space for euro downside if vote fails than scope for upside if vote passes
- "Should any of the outcomes lead to expectations for more fiscal spending or for more integration within the eurozone, this may make markets assume higher inflation rates and thus tighter monetary policy, pushing the EUR higher"
"Nafta talks and Davos increase the likelihood of trade-related sound bites which may reverse recent market positioning"
via Bloomberg
