The EUR/USD opened around 1.3100 in early Asia after the pairing surged higher on Friday in the wake of comments regarding central bank reserves by a PBOC official. The EUR/USD flew higher in early Asia initially on the back of EUR/JPY stops above 152.00 followed by stops in the EUR/USD getting triggered above 1.3125.
The EUR/USD traded up to 1.3180 before Japanese selling of EUR/JPY helped to cap the EUR/USD rise. The USD firmed later in the morning session led by USD/JPY and the EUR/USD drifted back to former resistance at 1.3125 before setting between 1.3130/45 for the balance of the active session. Sentiment towards the EUR/USD has turned decidedly bullish after the break and close above 1.3000 on Friday. There is speculation that a number of specs are short option vols in the EUR/USD and this could help fuel moves higher, as those positions go into stop loss mode.
Traders are still wary of the possibility that regional central banks might try and cap the move higher, but only a move back below 1.3050 will take the pressure off of the topside. There might be some consolidation ahead of key US data this week, but the bias is for higher.
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