EUR Trading Outlook
EUR/USD Price action in early Europe defined the range for the continent and NY. EUR/USD dived down from 1.2575 to 1.2505 after EZ PMIs were generally below expectations. Short covering bids into 1.2500 were too much to overcome and the pair steadily climbed towards 1.2535 as NY got going. Early NY action saw the low end of the range tested again after US CPI came in above f/c and jobless claims were below estimates. The dip was bought though as USD weakness from overnight carried over into NY's session. Another trip near the day's high was made but the range held. The pair then oscillated within the day's range for the remainder of the session. There is no major data overnight that might inspire bears to push EUR/USD lower so it's possible short covering dominates. With the pair holding above the 10 & 21-DMAs short covering risk is upped. Draghi does speak at 09:00 CET tomorrow so there is some danger the pair drops as any remarks he makes on economic risks are likely to be dovish.
EUR/USD Modest short covering was the theme in Europe's morning and early NY. EUR was bought vs many of the crosses with AUD,NZD, CAD and JPY the notable standouts. This saw EUR/USD lift from near 1.2410/15 towards 1.2450 before it slipped back near 1.2530 into NY's open. Early NY saw shorts cover more as soft US housing data dented the USD's lift while US yields slipped a bit. Stops above 1.2550 were hit and1.2571 touched before the pair pulled back to hourly support near 1.2520. The dip was bought as EUR/JPY bounced off intra-day support near 147.45 and EUR/CHF rallied after the latest Swiss gold referendum poll showed 47% are opposed. 1.2565 was neared as the FOMC minutes were released. Initial market reaction was deemed dovish and the USD got hit. EUR/USD spiked up to 1.2602 but the gains were quickly given back as USD/JPY rallied above 118.00 and US bond yields rallied. Hourly support near 1.2520 was threatened again but it held. Little bounce was seen and the pair sat just above the support late in the day.
EUR/USD Europe lifted the pair towards the 1.2540 area as USD longs lightened up after USD/JPY couldn't break the 2014 high. A slight dip saw the pair near 1.2500 into NY's open. The dip was bought as the USD's weakness continued and US bond yields slipped a bit. The pair again lifted towards the overnight high but couldn't break it. The USD recovered and JPY weakened to send EUR/JPY back above 146.50. This saw EUR/USD torn between a rising USD and rising EUR/JPY. The pair ranged 1.2502/1.2532 for a while before eventually making a marginal new high at 1.2545. Little pullback from the high was seen as EUR stayed firm against most major currencies even as EUR/CHF hovered near recent lows. Late in the day EUR/USD sat just above 1.2535. There is little data out of the EZ to drive price action so traders are likely to look to the BoJ and FOMC minutes for their cues. EUR/USD activity may be light until then.
EUR/USD Asia's rally was short lived and Europe erased the gains after the USD's slide reversed and comments from ECB's Mersch weighed. Mersch noted the theoretical possibility of buying state bonds, gold or shares. EUR/USD slid towards 1.2480 before a slight bounce had it near 1.2500 into NY's open. NY attempted an early lift but couldn't get it back above 1.2510. Comments from ECB's Praet and Draghi then weighed further. Praet was confident that the ECB will hit its 1 trln EURO balance sheet target while also noting the ECB built a strong disconnect with US rates and the ECB wants to keep it that way. Draghi was dovish again & noted additional measures could include further size and composition changes to the b/s. He also noted sov bond buys could be included in the unconventional measures. EUR/USD tanked, cleared the 200-HMA and quickly hit a 1.2445 low. bounces off the low were capped by the 200-HMA (1.2456) and the pair sat just below that average late in the day. Germany's Nov ZEW is the main risk o/n. A weak report likely sees EUR/USD under pressure. We may then see the 2014 low retested.
EUR/USD Europe rallied EUR/USD from near 1.2430 & pierced the 200-HMA but couldn't hold above it. A drift lower saw 1.2445 as NY got going. Sharp bear pressure was applied early after US retail sales were solid. EUR/USD hit a low of 1.2398 before a bounce near 1.2420 took hold. The above f/c TR/U. of Mich report weighed a bit but when it was clear it wouldn't be enough to inspire another leg up for the USD, longs began covering. This saw EUR/USD shorts scramble to cover. The highs in Asia & Europe were easily cleared before the pair paused briefly near 1.2500. When no serious pullback from that area was seen shorts covered further. Stops above 1.2525/30 were then hit and a high of 1.2546 was made. The USD slide abated somewhat and EUR/USD slipped lower to sit near1.2525 late in the day. Technically the pair looks like it can rally further as a bullish outside candle forms today, day/week RSIs are biased up and we'll see a close above the 10-DMA. Draghi makes a statement at the quarterly hearing of the Committee on Economic & Monetary Affairs. It's likely he'll be dovish and the squeeze may come to an end.
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