It will be interesting to see how much the boys in Beijing are willing to spend to defend the top of the 1.30/1.35 double-no-touch. My bet would be not all that much given the colossal sentiment shift underway in the developed markets, particularly Europe. There is a growing sense that the worst is behind us in Europe and that Draghi has engineered a game-saving recovery by rolling out the OMT to supplement the LTRO which stabilized the banks.
If nothing else, Draghi has bought time. He’s bought 6 months so far, and at least at the moment, it looks like he has another few more months with the wind at his back until the next crisis erupts. Flare ups in pissant economies like Cyprus will not derail the present momentum. It is going to have to be Spain or Italy (or even France) coming back into focus to halt this runaway train.
I would not bank heavily on China keeping a lid on EUR/USD at 1.3500…