EUR Trading Outlook (04-08-2014)

EUR/USD Light short covering in Europe’s morning lifted EUR/USD from below 1.3380 to 1.3402 just ahead of NY’s open. Hawkish comments from the Dallas Fed’s Fisher saw the pair pressed below 1.3390. The combination of NFP’s miss, uptick in the U rate and below f/c average hourly earnings dealt a blow to USD bulls that disregarded comments from Wednesday’s Fed statement regarding labor slack. The USD dived as US yields tumbled. EUR/USD spiked above 1.3430 before dipping towards 1.3410. The dip was bought & a high of 1.3445 was then hit. July’s ISM beat took some shine off the rally but the drop in June construction spending aided to keep the USD soft. Late day profit taking gave the USD some relief and the pair sat just below 1.3430. Today’s action sees EUR/USD back at the 200-WMA after rebounding off the 50% Fib of 1.2740-1.3995. Daily RSI has turned from o/s while weekly diverged. The risk of a short squeeze exists. There is little data due next week that would halt a squeeze. Shorts may cover until the ECB on Thurs. The l-t trend remains bearish and bulls need >1.3700 to chase away the bears.