EUR/USD might drop to 1.25 in the near term – UBS

According to UBS analysts, the EUR/USD rally ran out of steam due to the increasingly difficult Greek negotiations with no resolution in sight, and also because of some adjustments in the greenback pricing after strong nonfarm payrolls that put early QE less likely.

The market bias toward the EUR is still very negative, being the worst-positioned currency on a 3m and 12m basis: “Normally we would expect these conditions to be a warning signal for a squeeze, but such is the extent of event risk that pent-up selling demand remains very strong.”, write UBS analysts, forecasting 1.25 level in the near term, “especially if last week’s hedge funding selling is a sign that tactical euro longs are bailing out”.

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