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Where Politics Will Take the Euro

Tuesday, 24 Apr 2012 | 9:36 AM ET

The euro has been clinging to a tight trading range, but this strategist thinks that's about to change.

What's a little thing like a Dutch political conflict doing roiling the euro? Call it a tipping point.

The Dutch have been a key factor behind the European austerity movement, says Robert Rennie, Global Head of FX Strategy, Westpac Bank, and the collapse in budget talks there has come on the heels of an unsettling first round in the French election.

On top of that, a Dutch election will be followed quickly by the French second round and an election in Greece. And the Bank of Spain recently acknowledged that that country is back in recession.

All in all, says Rennie, the turmoil could finally move the euro out of its trading range and make it start to "unravel quietly, certainly through the first week of May."

The euro's current narrow trading range is "almost frustrating," Rennie told CNBC. "I get the sense that there is a barrier, some sort of physical option structure in the market that's limiting downside through the $1.30 level."

But investors are starting to line up short euro positions, and "once we take out $1.31, $1.30, then we're really looking for a fairly reasonable move lower, and certainly a move down toward the mid-$1.20s is very, very feasible in the second quarter."

EUR to Head to $1.30 and Lower
Robert Rennie, Global Head of FX Strategy, Westpac Bank says that the Euro could head to $1.30 and even the mid $1.20s soon.

Your move.

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