The pair opened at $1.2445 in NY Friday having seen a short squeeze from an early European low of $1.2384 to a high of $1.2465 just ahead of the NY open, as traders looked to reduce positions into year end as well as finding modest demand on news that a total of E39.758bn across both 3 year LTRO’s will be repaid on Dec17. The early part of the US session saw a dip to $1.2335 but the pair turned higher and following softer US PPI (-0.2%, expected -0.1%) the rate recovered to $1.2461 and then extended on strong euro-yen demand to a rally high of $1.2477. The choppy trading continued as stronger than forecast Uni of Michigan Confidence data with both 1 and 5 year inflation expectations revised higher produced a steep decline to $1.2433 where dip buyers emerged. Traders seemed not to be convinced by the inflation component as oil continued to plunge lower and UST yields once again headed lower, leading to fresh dollar selling and the pair rallied initially to $1.2471. Trading remained whippy but overall with a buy on dips theme, until trading up to a high of $1.2485, where offers ahead of $1.2500 kicked in and the rate gradually retraced to $1.2448 before closing at $1.2456.
