Dollar Strength Medium-Term

The euro has fallen from resistance at US$1.2600/EUR over the past two weeks to support in the US$1.2270/EUR region, as the market focuses on growth and interest rate differentials, as well as uncertainty surrounding the German elections. If the US$1.2260/EUR level gives way, the single currency will dip further to major support around US$1.2200/EUR. Any break of this level would be a negative signal for the euro, presaging a potential re-test of the US$1.1900/EUR low of July. However, we would expect the US$1.2200/EUR area to hold, ensuring that the 2.5 month uptrend remains in tact for now. This would therefore

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