EUR/USD continues to take back the ground inexplicably lost yesterday afternoon in New York. Central banks seem to be building a somewhat higher base for the pair in the 1.26s up from the 1.2560/1.25 region, sparking speculative interest in taking the pair back up to the 1.30/1.32 region. Latest reports have the BIS buying steadily in the 1.2740/80 region.
Dealers are playing a momentum-driven game at the moment, mindful that the Chinese data overnight showed no evidence of global recovery. As long as US stocks keep rising, dealers will stay comfortable holding euros. One the music stops, they will likely scramble for the sidelines. EUR/USD trades now at 1.2789. Offers remain between 1.2800 and 1.2820, yesterday’s New York high.