A stabilisation in ECB/Fed monetary policy expectations should trigger short position squaring lifting EUR/USD this week ahead, analysts at Credit Agricole say.

As more investors shift to the view that the ECB may now forego or at least delay additional easing (i.e. to give recent measures time to act) policy expectations should lift from their currently low base. Meanwhile in the US it appears some FOMC members have become concerned with markets perceived policy tightening profile and stronger USD.

With inflation expectations still falling despite ongoing US labour market improvement, such policy maker concerns may become louder this week.

Thus with ECB/Fed policy expectations previously the key pressure upon EUR/USD, our anticipated stabilisation should provide the catalyst for investors to look to book profits wary of any year-end rise.

Accordingly we went long EUR/USD as a trade recommendation Friday with a target at 1.31 and a stop of 1.2350. Notwithstanding this new tactical EUR/USD position, we remain structural bears and still look for 2015 depreciation due primarily to a superior US growth outlook.

Sounds like a decent basis for a trade, if you like fighting the longer-term trade. For more bank trade ideas, sign up to eFX Plus.