EUR Trading Outlook (23-05-2014)

EUR/USD Shorts were squeezed after the mixed EZ PMI results. EUR/USD popped from near 1.3650 towards Asia’s 1.3688 high. No further gains were possible though and the pair lingered just above 1.3680 as NY got going. Weak US data in the form of housing and jobless claims couldn’t inspire a lift for the pair and a steady drift lower took hold for the NY session. A low of 1.3645 was eventually hit as US yields continued their recent bounce. Aiding the slide is the fact that EUR/USD is getting more comfortable near recent lows and no short squeeze seems forthcoming. Other factors to help the pair lower today was ECB’s Wiedmann stating that reviving the ABS mkt isn’t a task for a central bank as well as an ECB source stating it will be recommended that Dexia can avoid the EU’s bank stress test. A small bounce saw the pair just above 1.3650 late in the day but lower levels look to be coming. Much of the May 21 bounce off the 200-DMA has been erased, day/week RSIs remain biased down and yield spreads edge further in the USD’s favor. A break & close below the 200-DMA opens the door to 1.3475/80 support.