EUR Trading Outlook
EUR/USD Short covering for EUR bears (particularly vs. GBP) drove EUR/USD above 1.3600 in Europe and tripped stops. Follow through saw a 1.3644 high before the pair pulled dipped near 1.3615 into NY's open. US bond yields were soft early on and the USD was generally offered. NY initiated their own rally but could only manage 1.3640. Spec & macro offers in the 1.3640/50 zone were too much to overcome. US yields recovered early losses & turned positive for the day while US equity mkts swooned. EUR/USD slid from NY's high but stalled at 1.3603 as that old 1.3600 resistance now turns to s-t support. Further support sits 1.3560/70 where s-t spec t/p bids and the 200-hour MA sit. The pair is still consolidating in the post-ECB 1.3500-1.3680 range. This should resolve itself to the downside eventually but the break may have to wait. The market remains short EUR and day/week RSIs are in the process of unwinding recent o/s conditions. No major data is due into the weekend so it's likely the pair will stick within current ranges.
EUR/USD EUR bears covered shorts in European hours, mostly vs. GBP, and EUR/USD lifted from s-t sup near 1.354. It sat just above 1.3560 into NY's open. The pair's bid persisted in early NY after the US current account misses big. A lift near 1.3585 ensued before the pair settled into a 1.3565/80 range ahead of the Fed. Post-Fed saw algos go wild. The lowered Fed 2014 GDP f/c and fewer FOMC members wanting a hike in 2015 sank US yields and the USD. EUR/USD spiked up to 1.3600. Offers into the 21-DMA & June 10 high halted the rise and a reversal in US yield losses then spiked EUR/USD down to 1.3548. Yellen's presser gave no surprise hawkish comments and US yields slipped again. EUR/USD rebounded and sat just below 1.3590 late in the day. Risks to a bigger short squeeze grow post-Fed. Bears are frustrated that the downside is holding while spread widening abates and day/week RSIs turn up. Stops sit above 1.3605 and if run the 200-DMA & early June high (1.3565/75) are then targeted. A break there opens the door to a test of the 21-WMA (1.3727) and May 12 high at 1.3775.
EUR/USD Europe made a couple of attempts to clear the 200 hour MA overnight but failed. Solid offering interest ahead of 1.3600 conspired with the MA to cap European bulls at 1.3579. A drift lower had it near 1.3565 into NY's open. A brief rally came crashing down after the above forecast US CPI. US yields spiked higher after the data & the USD went broadly bid. EUR/USD dived down to a 1.3536 low but only a meager bounce near 1.3550 was possible. US yields and the USD held firm in NY's afternoon and the pair sat near 1.3540 late in the day. Traders now await the Fed tomorrow. They will look to see if today's CPI has the FOMC's language take a more hawkish bend. Should that be the case EUR/USD is likely to take out the 1.3500 barrier and run stops below that level and 1.3475/80. Bears then target big support near 1.3300. Should the Fed lean the other way EUR/USD bears are likely to cover. The pair then may be set to trade a broad 1.3500-1.3750 range for the time being.
EUR/USD A spike in US yields early in Europe's morning saw EUR/USD make a quick dive to 1.3500/15 support again. The level held though and the pair sat near 1.3545 into NY's open. The bounce persisted in early NY even as U.S. IP, Cap Utilization and NAHB data gave positive surprises. Short covering on recently popular carry trades and a give back of early US bond yield gains aided EUR/USD's lift. The pair rallied to the 200-hour MA (1.3580 at the time) where large offers were noted on the aggregators. More offering interested was noted up to the 1.3600 area. This was enough to halt the rally & the pair pulled back to sit near 1.3565 late in the day. Little data is due from the EZ so the broad 1.35-1.36 range is likely to remain intact. The US releases CPI tomorrow & has the FOMC on Wednesday. hawkish results from those two events could lead EUR/USD to break its recent consolidation phase and make a run for stops below 1.3500 and large ones touted below 1.3475/80. A stop run could see the pair make a quick run to solid support near 1.3300.
GBP/USD - within a bullish channel
The pair has rebounded on the lower boundary of a MT bullish channel and has validated a bullish flag. Moreover, the moving averages remain well directed. Therefore, as long as 1.6450 holds as a support (previous overlap), further advance is likely with 1.7040 at first (August 2009 top and strong overlap) and 1.74 in extension (horizontal resistance and overlap). A third target is set at 1.79 (horizontal resistance). Only a break below 1.6450 will turn the outlook to bearish. In this case, a first alternative target is set at 1.62 and a second one at 1.5870 (November 2013 bottom).
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