Since the last bullish leg stalled at 1.4340 6 weeks ago, this pair has been in a consolidation phase. The big option play which China has been running has added to, or led to, this price action. Now that these options are starting to roll off, EUR/USD is likely to go for a run in one direction or another. China remains a net buyer of EUR/USD at the moment as they struggle to manage their massive $USD surplus and as they are by far the biggest player in the market, this would indicate that the next break is onto a higher plane, 1.40/1.47 for instance. Some factors weigh against this view, namely the structural problems which are still evident inside the EU, the potentially massive financing problems in Eastern Europe and finally, that EUR/USD belongs around 1.20, not 1.40.

Whatever your view, let’s hope we are about to see a break in one direction or another.