Euro Zone data today has underpinned the "Buy on dips" mentality in EUR/USD. EZ M3 data surprised on the upside, to add pressure on the ECB and the need for further monetary tightening into the end of the year, if not into Q1 07 also. EUR/USD was initially sold into European trading as the failure to hold the break into the 1.2700's combined with the EUR/JPY sales to leave spot looking damp.
However, official bidding into 1.2665, form an Asian central bank and another regional official player, helped prop before the speculation of a weaker than expected US GDP release soon forced the Dollar onto the defensive once more.
Option players also note a large 1.2700 option strike intraday at the NY cut-off(14:00 GMT) with barriers seen into 1.2750 with talk of 1.2725's. Looking ahead, US Advance Q3 GDP data is set for release at 12:30 GMT. The consensus is for a release around the +2.2% mark but the afore mentioned speculation already has some looking for a reading around the +1.8% area. Should such numbers be seen then the option barriers & 1.28 Would soon be eyed.
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