EUR Trading Outlook (19-08-2014)

EUR/USD After trundling in a tight range capped by offers at 1.3400 all night and into the NY morning, EUR/USD finally broke below that range and the 200- HMA on word the NAHB was better than forecast, but the sell-off fizzled after there was no follow-through to speak of below Friday’s 1.3359 low. While there was no follow-through, there also wasn’t much of a bounce to speak off from the 1.3353 session lows. Rising Tsy yields helped the USD generally, while the EUR failed to get any help from widespread equities and risk rallies. In the absence of reserve manager rebalancing demand, some of which may have been lost as hot money exited China recently, and amid the ECB’s -10bp depo rate and the major uncertainty from Ukraine, the EUR just doesn’t get the risk-on bounce that it used to. Range bidders at 1.3330-40 with stops building below. Betting has begun as to whether Draghi’s Jackson Hole trip will pave the way for more easing, and specifically QE, so many are keeping their powder dry until Friday’s key speeches. Traders watching the 21-DMA as a topside pivot, Tuesday to be at approximately 1.3402, but below last week’s 1.3416 high.