The early Asian rally to 1.3434 removed stops but spot failed to retest the 1.3440 high from last week. European action saw the bulk of the market return from the long weekend and thus liquidity thickened. Option related sales are still seen trailing back to 1.3450. German and French data did little to add further volatility thus Europeans favored buying EUR/JPY but the failure to touch 160 forced a slight pullback and this weighed on EUR/USD.
The pair eased back to 1.3400/05 support before fresh buying emerged and the price soon rebounded to leave the sub-1.34 stops intact with 1.3405/25 then worked. Looking ahead, the market has already discounted the ECB meeting this week. The verdict is due on Thursday but in a recent poll of 72 economists, not one of the participants opted for Euro Zone refinance rates to finish the week at a different point to where they started.
As a result, it will be the tone from the accompanying statement that garners more support for the Euro. Should Trichet talk up inflation risks, as his colleges have been, then EUR/USD could cast an eye on the large 1.35 KO's that expire both sides of the result.
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