EUR Trading Outlook (09-05-2014)

AUD/USD: The 21-DMA and April 30 low were cleared. The slide fell short of the double lows of April 22 & 23 (1.4710/15) as it stopped at 1.4760/65. Further pressure may be put on the rally as daily RSI is biased down and yield spreads widen. Attention now shifts to RBA’s SOMP later today. Any upgrades to econ growth and inflation should boost AUD further against most currencies. AUD/USD may then run for stops above 0.9400 and test weekly cloud base at 0.9425 while EUR/AUD may clear 1.4710 and April low near 1.4645.

EUR/USD: Not a good day for the EUR, or those who bought it after the ECB announced no changes to policy, only to run into a slew of hints from Draghi in his presser that the prospect of very low-for-a-long-time inflation and more downside than upside risks to the economy meant that an easing at the June meeting is a serious threat. He also noted the strong EUR’s unwelcome role. EUR/USD spiked to its 1.3995 high after US Claims fell back nicely and Draghi took a little time getting to the more overtly dovish portions of his Q&A. The barrier defenses into 1.4000 held and longs trampled each other to get to the exits, removing o/n and the preceding four days’ lows in the process. The 21-DMA at 1.3846 is nearby as the NY session winds down. Yellen remained true to form, but reminded that even taper completion was a function of data- dependency tests at each meeting. A poor US 30-yr auction added a little yield-differential weight to EUR/USD, but no new intraday lows yet. Today’s weak German IP will place some emphasis on Friday’s German Trade & C/A results. China CPI up first, after better Trade data there o/n. No good news from Ukraine.