EUR Trading Outlook
EUR/USD The combination of weak EZ Sep retail sales &Oct services PMI and broad USD strength saw EUR/USD dive below 1.2470 into NY's open. Early NY saw a lift even as the ADP jobs report saw a topside surprise. USD bulls emerged though as EUR/USD neared 1.2510 & USD/JPY pressed on towards 115.00. EUR/USD gave up the early NY gains & went on to make a NY low of 1.2458 after the ISM non-manufacturing employment came in at its highest since August 2005. The slide couldn't gather pace though as large option expiries at 1.2500 for later this week and the upcoming ECB meeting & US NFP report kept traders from pushing the pair too far in either direction. A lift back to 1.2500 took hold into Europe's close. A late day sip then saw the pair near 1.2475 near the end of the session. It's likely the pair doesn't stray too far from 1.2500 until Friday. The ECB isn't expected to make any new moves tomorrow so Friday remains key. With large expiries for that day and the NFP due traders will keep their power dry. A big upside surprise for NFP might see the l-t bear trend resume and the July 2012 low will be eyed.
EUR/USD A tight range held for Europe and NY's morning. The pair lingered in a 1.2500/30 range as the market seemed content to wait for the ECB on Thursday & NFP on Friday. The pair sat near the lower end of the range when the market was abruptly shaken from its slumber on a Reuters exclusive story. The story noted that several national CBs in the Euro area will challenge Draghi's leadership style on Wednesday. The source of the story noted that the CBs are angered that Draghi set a target for upping the ECB's balance sheet as well as being secretive in his management style. The market took this story as a hurdle to further ECB easing. EUR/USD spiked up, ran stops above 1.2550 and hit a high of 1.2577. Action then settled quickly and some of those gains were given back after Europe's close. Some squeeze risk remains as day/week RSIs haven't confirmed recent lows and the weekly candle has a long lower wick in place. Further unwinding of shorts may push the squeeze until ECB & NFP risk is past. Until then the risk for a run above 1.2645 is extant.
EUR/USD grudgingly climbed in Europe's morning. It lifted from near 1.2480 towards 1.2510. Big gains in EUR/JPY (140.70 to a NY high of 142.56) aided the lift but they were offset by broad base USD strength as USD/JPY blasted higher from the 112.85 area. EUR/USD sat just below 1.2500 as NY got going and saw an early lift back to 1.2510 as EUR/JPY stayed firm. The USD's bid remains and the pair began slipping. The slide accelerated a bit as a Reuters poll showed a median 50% chance the ECB will buy sovereign debt in the coming year. This was upped from a 40% chance noted from an Oct 13 poll. The slide's pace was then upped after a big upside beat to October ISM sent US yields and the USD higher. EUR/USD went on to hit a NY low of 1.2471 before lifting back above 1.2485 late in the day. There is little major EZ data due so traders look to the European Commission's autumn econ forecasts and US Sep factory orders for some cues. It's likely they'll have limited impact as the market's attention is more focused on Thursday's ECB meeting. Until then the pair may hold in a tight & choppy range.
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