Factors have conspired to support EUR/USD intraday. EUR cross buying (EUR/JPY, GBP & CHF), the positive EZ rate outlook, a drop in the USD Index and the emergence of official support for the Euro were all publicized into the European morning. Early trading saw Mid-East Dollar sales pressure the US unit before Russian interest sparked a EUR/USD rally to 1.3100.
Offers into the figure have since capped but tight topside stops are eyed. Looking ahead, better sized stops sit above 1.3150 but with the Bernanke testimony on the horizon (15:00 GMT) the spot move higher may stall until the FOMC Chairman has had his say. Ahead of this, US retail sales data will be eyed.
On the options front, 1.29/31 DNT's were erased by the early move higher but dealers now talk of 1.3110 barriers with potential for further short-term 1.3100 exposure as traders hedged amid the European morning rally. Elsewhere, the German DIHK noted that a 25bp increase by the ECB "is to be expected in March and another increase after that is not to be ruled out". The institute also noted the potential for further strength in the Euro.
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