Deutsche Bank - "We’ve been bullish EUR/USD since last August. With the cross reaching our 1.35-1.40 target range last week, it’s a good time to assess where we stand relative to the EUR-supportive factors we identified six months ago:
(1) Relative monetary policy: we argued that the LTRO prepayments would lead to a policy tightening in Europe before the US. With the market now pricing an additional 350bn EUR reduction in excess liquidity by October, we view the bulk of that re-pricing as now having materialized.
(2) Positioning: the market was significantly under-positioned in EUR relative to the compression in risk premia which has continued into 2013. We don’t see EUR/USD longs as being particularly large, but overall positioning is now more balanced.
(3) Euro-area growth: the bounce in Europe is finally materializing, with data surprise indices running at their highs, in contrast to the other side of the Atlantic, where data surprises are at their lows.
(4) (...) Finally, and most importantly, the market had underestimated the improvement in the Euro-area’s external accounts, with the region benefiting from one of the most solid basic balances compared to the rest of G10.
With the first three cyclical factors above largely priced in, we think now is a good time to take profits on our EUR/USD longs. That’s not to say we are turning bearish the euro..."