Interbank dealers tell us that a barrier expires this morning at the 1.3440 level. 1.3439 was the high earlier in the day but 1.3437 was the last level at which 10 mln EUR/USD went through. Very large offers are seen ahead of the barrier, dealers report and my guess is that the offers dovetail with earlier reports of Chinese buying on dips to 1.3330. When defending a barrier, the defender can then come in and buy back the euros sold, essentially reloading for the next defensive maneuver if the market rebounds.
The bank that sold the barrier option has tremendous incentive (trying to avoid a multi-million EUR payout) to knock-out the barrier, so a further topside probe is probable.
