After trading sideways throughout the Asian and European sessions, despite surprisingly positive European sentiment numbers, the Euro came to life on the U.S. open to jump out of the previous 3-day range and settle 40 pips higher on the day. We see the Euro as still being a bull over the intermediate-term and consider the 400 pip sell off in the first half of February as a correction.

ECB Boss Draghi has proven himself a powerful central banker by engineering higher currency prices despite fundamental weakness in his banking system, and having to harness such a disparate constituency. Draghi's plan was a simple one: provide relieve for European banks by insuring that money being paid back to them is not at a lower exchange rate but at a higher one. Sophisticated speculators who borrowed Euros in 2011 & 2102 and converted them to other asset classes, such as gold, or U.S. Dollars, thinking they would repay the Euros at a much lower rate are no longer looking so sophisticated. While Draghi and the Europeans took some pages out of the U.S. Fed's playbook re: using public sector funds to back-stop private sector debt, they kept interest rates unchanged, creating a positive carry trade against the Greenback which proved enough of a tax on speculators to back off on their short Euro bets. The rally will also have the benefit of allowing Euro lenders the opportunity to hedge their longer-term exposure at much more favorable rates than they were looking at just last summer.

While Draghi did his job well over the last 6 months in boosting the Euro's value, the question is will the market allow the Euro to hold that value? We do not see the Euro moving much beyond the current 2013 high at approximately 1.3700, but aren't prepared to bet against higher prices just yet. The 1.34 handle still may prove cheap near term, but 1.38 + would get our attention. We see nothing wrong with considering a possible short campaign just below the 1.40 level - the same levels we anticipate will see banks hedging their exposure at.