Why EUR/USD longs are a risky trade - Credit Suisse

Credit Suisse remains suspicious of EUR/USD capacity to sustain a rally despite the sharp decline in US rates

The euro is down 35 pips to 1.1247 today.

"We suspect the ECB will continue to jawbone it lower whenever it pushes beyond the EURUSD 1.15 level as there are enough disinflationary forces still in evidence in the euro area to make this a sensible policy," Credit Suisse argues.

"Looking at the Volkswagen crisis for example, there is talk both of sharp cuts to investment and auto price wars that could shave a further 0.1% off euro area HICP. The macro data flow is not up-to-date enough to show these potential developments," Credit Suisse adds.

"With the market inclined to believe the idea that the ECB can and will do more easing if necessary, and with the 22 October ECB meeting on the horizon, long EUR still seems a risky trade," Credit Suisse warns.

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