EUR Trading Outlook
EUR/USD Persistent USD weakness in Europe's morning saw Asia's gains added to. EUR/USD rallied to a 1.2791 high before dipping near 1.2760 into NY's open. The USD recovered after USD/JPY failed to clear 107.50 and US bond yields took back early losses. EUR/USD slid from the NY open and never looked back. The pair tested support near 1.2710 before a slight bounce took hold. Germany's Schaeuble hit the wires noting that 'if we don't stick to the EU budget rules, monetary union doesn't work.' He also noted that the European situation will change when France & Italy implement structural reforms. Draghi then spoke. He noted reform is needed & Gov'ts with the fiscal space should use it. EUR/USD slid on these remarks. The slide gathered pace as JPY strength drove EUR/JPY through 137.30/35 to an eventual low of 136.66. EUR/USD follwed & hit a low of 1.2664 before bouncing back near 1.2685 late in the day. The 10-DMA and Oct 8 low are s-t support. Breaks of them may mean the short squeeze is over. A return the 1.25 may then occur.
EUR/USD NY walked in with the pair near 1.2650 and they made an early push towards 1.2640 as the USD was firm early on. The dip was bought though. USD/JPY seemed to drive market sentiment and its slip from near 108.50 allowed EUR/USD to rally just above 1.2690. A recovery for the greenback and USD/JPY's break above 108.50 sent EUR/USD back near 1.2650 ahead of the Fed minutes. The minutes were deemed dovish as the Fed seems in no rush to raise rates while they also noted more USD strength could hurt parts of the econ & slow inflation's rise. EUR/USD spiked higher as the USD fell across the board. The pair ran stop above 1.2700/15 and hit a 1.2749 high. Offers at 1.2750 capped. A slight recovery for the USD saw EUR/USD pullback but only slightly. Late in the session the pair sat near 1.2725. There is no major data in Asia to impact the pair so traders will wait until the ECB's monthly report is released in Europe's morning.
EUR/USD Asian names sold the spike higher to 1.2665 in Europe's morning. The slide saw EUR/USD dip to 1.2585 just before NY got going. NY walked in and immediately rallied the pair towards 1.2625. US bond yields were soft and USD/JPY slid closer to the all important 108.00 area. EUR/USD's rally pushed to 1.2655 before EUR/JPY weakness took control. That pair slipped from near 136.95 to a low of 136.56. EUR/USD dipped to 1.2615 but the dip met buyers. Persistent yield weakness had the USD on its heels vs. most major currencies. EUR/USD rallied towards Europe's high and sat just below it late in the session. There is no major data due that would seriously impact the pair so the recent short squeeze may persist. Technicals & yield spreads back up that view. Day/week o/s unwinds continue and spreads are narrowing. The 10-DMA is capping gains for now but a clear break puts 1.2700/15 in play. Longer-term bears likely sit there but a break of that latter level may inspire a much bigger squeeze and put 1.2850/1.2900 in play.
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