Failure above 1.2100 the first time in the euro, the congestion zone which I have beenflagging. I guess was a surprise to be up there given the price action Friday was so dull, sowe revert back to where we spent most of the time post European PMI prints. With the Fedtomorrow, I guess we won’t make too much new ground with an outside risk there’s amessage on discussions around tapering, although think that’s overall a long shot, butenough to temper enthusiasm nonetheless. Beyond tomorrow evening, it’s important to thinkabout what drives the euro in the next few weeks, and whilst the market has corrected fromits overly pessimistic view around Europe, the question is how much higher can we go givenUS data will be the focus first week of May. The last round of strong US data resulted inyields coming lower and the usd selling off, but from a lower yield level if we get anotherstrong set of numbers there’s obviously more of a risk the other way this time. So in short,respect the price action and whilst we continue to make higher lows in the euro continue torun longs, but aware more two way risk at these levels to the view. 1.1980 is the key level tothe downside now, a clearance of 1.2120 above opens a potential move to 1.22/1.23 which Iconsider to be the target zone in the short term.
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