EUR/USD has been pushed to the upper reaches of recent ranges by the bailout of Citigroup, the appointment of Obama’s economic team and talk of large stimulus plans and delayed tax hikes. It may prove difficult for EUR/US to overcome resistance in the 1.2800/50 area without a continued rally in US equities.

One factor helping keep markets underpinned is the fact that options books are short which requires them to buy EUR/USD on strength and sell it on weakness. In thin markets, this can cause major price dislocations with no particular rhyme or reason.