• The move higher today in the EUR has been led by short-covering, with Chinese data perhaps setting off the stops but ultimately the reason behind today’s rally is that the market is short. Expect any dips now back towards 1.2650 to be well supported unless more bad news eventuates out of Greece or Portugal. In the event of no news, I’d expect a test of 1.2880 in coming days
• The AUD buying has been led by Sovereign names from all over the globe, with Europe’s troubles making Australian bonds very attractive from a security perspective and many asset managers have had to chase the market higher today. Once this buying is satiated, we should see the AUD/USD and EUR/AUD pairs settle down. There was some speculative buying just before the China data but they probably knew that the asset managers were chasing the market.