EUR Trading Outlook
EUR/USD Europe crushed EUR/USD to 1.2590 after EZ CPI was initially reported below f/c. Broad based USD strength exacerbated the move. Early NY saw that USD strength carry over and EUR/USD was driven to a new trend low of 1.2571. The USD's rally abated and EUR selling relented. A profit taking lift took hold. The lift's pace increased though. A combination of a string of below f/c US econ data and an upward revision to the EZ core inflation estimate from 0.7% to 0.8% y/y from Eurostat aided to speed the rise. EUR/USD rallied to 1.2635. The USD remained somewhat soft in NY's afternoon and EUR/USD sat just below NY's high late in the day. The market remains in sell rally mode and offers are touted in the 1.2655/60 area with more in the 1.2690/00 area. The risk of a squeeze remains but a squeeze is unlikely to gain much traction as the ECB meets Thursday. The market is expecting the ECB to up its easing arsenal at some point in order to seriously expand its balance sheet and EUR likely stays heavy as a result.
EUR/USD Broad based USD weakness (particularly vs. JPY) in Europe initiated a profit taking short squeeze that had EUR/USD near 1.2690 into NY's open. The lift continued as German Sep. HICP came in above f/c, USD weakness persisted in early NY and soft US yields offered no help the USD bulls. EUR/USD rallied to a session high of 1.2715. Resting offers from Asian names capped the rally and a recovery for the USD aided to push EUR/USD briefly below 1.2680. Dovish comments from the Fed's Evans and his note of USD strength being taken into account on the affects of trade & inflation combined with a soft US pending home sales number to send EUR/USD higher once again. The pair traded above 1.2713 but bulls ran out of gas as the USD staged a recovery. Late in the day the pair sat just above 1.2690. Traders now look to German Aug retails sales & Sep unemployment data as well as EZ Sep CPI for cue tomorrow. Weak results will weigh on EUR. If the results are slightly upbeat a short squeeze might ensue but l-t bears likely fade any rallies as the mkt sees the ECB adding more easing measures soon.
EUR/USD Europe held the pair to a relatively tight range as it appeared a quiet market was setting up into the weekend. EUR/USD bears were abruptly shaken from their slumber in early NY though. USD/JPY powered through the 109.10 levels and US bond yields saw a strong rally. Both rallies coincided with the announcement that Bond investor Bill Gross was leaving Pimco to join Janus Capital Group and had some traders attributing the rally to that event. EUR/USD dived from the 1.2745 area and didn't let up until it hit 1.2679. A brief bout of USD weakness allowed a bounce above 1.2700 but USD strength returned (particularly vs. JPY) and EUR/USD slid to a new trend low of 1.2677. Very little bounce was seen and the pair sat near the low late in the day. Traders now turn their focus to German & EZ CPI readings and the ECB next week. Soft inflation data will put further pressure on EUR/USD. Traders likely look to sell rallies ahead of the ECB as market sentiment grows that the ECB's current plans won't expand their balance sheet enough and they may resort to QE. It's unlikely the ECB will announce additional easing methods next week though.
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