Rabobank - "By late September some of the optimism that lifted EUR/USD during the summer months had begun to wear thin. The combination of policy action from both the ECB and the Fed early in the month has created a surge of risk appetite which both boosted the EUR and simultaneously pressured the USD. Faced with the implementation of more budget measures in an environment of deep recession, October promises to be a challenging month for Spain. The government is clearly in no rush to suffer the humiliation that a request for a bail-out package would bring but a support package will likely be necessary soon in order to keep funding costs contained. If the weeks ahead do prove to be a rocky ride for Spain, the EUR can also be expected to suffer potentially sharp pullbacks. We see risk of a move back towards EUR/USD1.2600 on a 1 mth view. That said, the fiscal cliff in the US is nearing. This provides the backdrop for the maintenance of a very accommodative monetary policy from the Federal Reserve. On the back of this we see any bouts of USD strength as likely to be short-lived and expect that EUR/USD will trend towards 1.3500 medium-term."