EUR Trading Outlook
EUR/USD opened in Asia at 1.2960, down from the Hilsenrath inspired climb to 1.2995 late Tuesday and continued to drift lower into Europe. Some order activity providing some direction from the early London 1.2943 low but offers back in the 60-70 area look to have slowed the recovery. The market now hunkering down ahead of the FOMC and Dollar bulls looking for any indications of a change in the Fed’s position with regard to tighter policy. Bids 1.2930-40 and offers 1.2960-70, 1.2980. Firmer EZ inflation on Aug revisions had little impact on the market and are unlikely to change the stance at the ECB. EUR/USD plays 1.2943-1.2966 on the day.
EUR/USD Europe applied pressure to EUR. It was mostly on the crosses but EUR/USD did feel the effects. EUR/GBP slid from 0.7984 towards 0.7945 and EUR/JPY slid towards 138.45. EUR/AUD sales from HFs also added pressure. These sales saw EUR/USD fall from near 1.2965 to below 1.2920 before the pair bounced towards 1.2925 into NY's open. NY pressed further as EUR cross sales persisted, with EUR/AUD sales by HFs the standout, and EUR/USD hit 1.2909. The weak US IP data added pressure to already soft US bond yields and the USD saw some broad based sales. EUR/USD rebounded and some short covering took hold. The s-t macro accounts were noted buyers covering and the pair rallied to a NY high of 1.2952. The USD staged a bit of a comeback and the pair slid below 1.2940 where it sat late in the session. Further short covering cannot be ruled out ahead of major event risk as the mkt still has a large net-short EUR position. The Fed meets Wednesday and the ECB's first round of TLTROs is scheduled. The mkt seems to have built in some hawkish sentiment from the Fed. If it doesn't materialize USD longs are likely to bail out. If the TLTRO take up is light EUR shorts likely get squeezed.
EUR/USD A tight range held in Europe as the mkt contemplated whether short covering into the weekend or further USD strength would reign. The USD was firm but positioning dominated as EUR/USD lifted from 1.2915 & sat near 1.2930 into NY's open. The short covering persisted in early NY as the pair neared 1.2955/60 but US retail sales data weighed. The headline data met expectations but prior data was revised up. US yield lifted as did the USD. EUR/USD spiked down below 1.2910 but the dip was bought. A steady ascent then saw the highs of Sep 8 & 10 cleared and weak stops above 1.2970 run. The rally extended to the 200-HMA but failed to gain ground as solid offering interest was reported in the 1.29870/90 area. The USD recovered some lost ground and EUR/USD slid towards 1.2940. Late in the day the pair sat just above 1.2945. Bears might get squeezed again early next week. Weekly RSI diverged on the new low and a doji formed on the weekly candle. With such a big drop recently a deeper retracement within the longer-term down trend cannot be ruled out. Above 1.3000 eyes good res near 1.3125/50.
Go to Euro (EUR) Archive