The bet on the euro short positions may increase in the following months as the Paulsons rescue plan may pull out the U.S. financial system from the crisis, while the Eurozones economy will be in recession.
According to UBS investment bank, traders should sell euro against dollar as the Europes economy weakens. Germanys business confidence is currently showing the lowest level in the last 3 years. U.S. government will probably pass the $700 billion plan through the Congress, stabilizing the worlds largest economy.
Analysts expect the support for dollar as the global central banks and private institutions will return to treasuries and will prefer them over the bonds issued in euro. Thats, of course, if the plan passes the Congress debates.
EUR/USD fell from 1.4615 to 1.4590 as of 8:38 GMT today. UBS recommends targeting 1.4250 rate on EUR/USD with a stop-loss near 1.4890 — a likely level if the $700 billion plan isnt accepted or U.S. fails to attract enough investments into the treasuries.
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