The euro held near a six-week high against the dollar on Tuesday, threatening a break past $1.37 that could quickly see it back at levels expected to provoke at least a verbal response from the European Central Bank.
Dealers said there was strong support for the euro around its 55-day moving average at $1.3698 and it retreated after touching that level overnight.
A number of analysts from the global financial system's biggest banks have returned to arguing in recent weeks that the dollar is on the verge of a push higher, given the prospect of rises in U.S. interest rates sometime next year.
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But the greenback disappointed heavily on similar bets at the start of this year and there is little sign yet of a move higher. The eurohas recovered all of the ground lost since the ECB announced a new round of monetary easing a month ago.
"I'm not sure we're quite at that level yet, but above$1.38 I think might put it back on the bank's radar," said Ian Stannard, a currency strategist with U.S. bank Morgan Stanley in London.
"$1.37 is the top of the recent range so I wouldn't besurprised if there are big stops around there."
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Dealers pointed to a large option taken last month that would be triggered by a break above $1.37.
Stannard is among those calling for a stronger dollar, however, pointing to increasingly stretched valuations on European stock and bond markets which may begin to stem the flood of investment over the past six months.
The ECB's action last month will push yet more cash into circulation in Europe, but growth remains very weak at a time when U.S. jobs data on Thursday may show the non-farm economy created more than 200,000 new jobs for the fifth-month running.
Another short term question is where BNP Paribas will get the almost $9 billion it has agreed to pay U.S. authorities in a settlement for sanctions.
Some traders were speculating on Monday that the bank has not hedged the bulk of any such dollar order and will need to do it in the market.
"The upside for the euro is likely to be limited," Stannard said. "Post-ECB I would expect the euro to come back under pressure. The overall monetary policy stance generates a soft environment for the euro."
The euro was 0.04 percent lower at $1.3689.
-By Reuters