EUR Trading Outlook
EUR/USD Bears were looking for an excuse to lighten up on shorts ahead of tomorrow's ECB meeting. News out of the Ukraine/Russia situation seemed to indicate tensions were easing. EUR/USD spiked up above 1.3155. Some contradictory follow-up statements on the issue saw some of those gains erased and the pair slipped towards 1.3140 into NY's open. NY pushed the pair higher early as the USD was soft and bond yields slipped from their highs. A high of 1.3160 was hit but Asian offers sitting 1.3160/70 capped the rally. Soft stocks and JPY strength then pressured EUR/JPY from its 138.28 high towards the NY low of 137.73. This helped EUR/USD slips from its high and down to 1.3135 before rebounding just above 1.3140 late in the day. EUR/JPY saw only a slight bounce off the low and sat near 137.80 late in the day. Traders now look to the ECB for their next cue. Action by Draghi isn't expected by many but a surprise cannot be ruled out. Should the ECB act with a new easing measure EUR/USD's bear trend should resume. A quick test of the psychological 1.30 level is then probable.
EUR/USD Europe pushed EUR/USD to a new trend low as it reached 1.3110. The pair sat just above that low as NY got going. Further losses weren't possible during NY hours even as the USD mounted serious gains vs. other major ccys. Short covering in many EUR crosses and JPY weakness combined with solid EUR/USD bids sitting 1.3110-10 to see EUR/USD lift slowly from the lows. Above f/c August ISM data allowed a small slip but the rise persisted. The lift stalled just ahead of 1.3135 though as offers touted in the 1.3135/45 loomed and EUR/JPY's rally fizzled out. Late in the day EUR/USD sat just above 1.3125. The trend remains bearish but short squeeze risk is extant. Traders may lighten up on large short positions that have been built recently. The ECB is due Thursday and the market seems to have priced in action by the bank. Some of that positioning may get unwound ahead of the meeting. Stops are touted above 1.3140/45 and may come into play if the pair can't break below today's low soon.
EUR/USD Sentiment towards the EUR remains extremely negative and the market continues to add to already large EUR short positions. The EUR is being used as a funding currency for carry trades, as EZ short-term yields continue to disappear, and was pressured by carry trade demand overnight and into Europe, as EUR/AUD; EUR/NZD and EUR/CAD selling flows were noted. The uncertainty surrounding the Ukraine/Russia crisis also adding to the bearish sentiment as further EU sanctions against Russia will negatively impact the already fragile EZ economy. As the European session got going a bout of short covering out of Asia provided scope for a modest rebound to 1.3146 and this from a new 12-month low of 1.3120.
EUR/USD Europe rallied EUR/USD after EZ inflation data was basically inline with estimates. Short covering ensued and the pair lifted towards 1.3200 ahead of NY's open. Anticipation of USD month-end sales likely aided the lift. NY had other thoughts on their minds though. They immediately pushed the pair lower even as US consumer spending data dented the USD a bit. The pair slid just below 1.3170. The slide look to have been aided by Goldman Sachs lowering their 3, 6 and 12 month EUR/USD f/c to 1.29, 1.25 and 1.20 respectively. Month-end USD sales did emerge into 11 a.m. hour but bears quickly took over and sold aggressively. they cleared the 1.3150 and ran stops below it. A new trend low was set for the pair. there was little relief as the pair sat just above 1.3136 late in the day. It appears traders won't wait for ECB action to unload EUR. With BNP, RBS, Nomura and JPMorgan now expecting an ECB cut sentiment grows that some form of easing action will take place next week. A test of 1.3100 is likely pre-ECB. If that is cleared a quick run to 1.3000 may be in order.
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