The euro continues to hover in a tight range around 1.3150, with a clear bias to press higher. Traders viewed the morning run-up as a squeeze of short-term short positions, rather than a new fondness for the euro. However, the old bias of selling euro rallies (especially ones to 1.3200) may be a thing of the past. Peripheral yields have fallen sharply, as have spreads over Bunds. Deutsche Bank earnings came in better than expected. And the various crises hot points (Cyprus, Greece, Portugal, Italy) appear becalmed for now. Even a 25 bp ECB rate cut will be viewed as a positive for the euro (in terms of spurring growth) rather than a negative (lower yields).
Offers are in place ahead of recent tops near 1.3200, with stops above that. A clear-cut break of 1.3200 would target the February 25 highs near 1.3319, although the old 2013 lows in the 1.3255-80 zone may act as initial resistance. The euro earlier broke above its 100-day moving average (1.3160) for the first time since mid April, when the pair traded above the 100-day but did not close above it. The euro last closed above its 100-day on February 27.
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