EUR Trading Outlook (22-08-2014)

EUR/USD A new trend low of 1.3242 was carved out in Asia, but by then the USD bid from the Fed Minutes had been priced into a market that remains oversold and heavily net spec short EURs heading into Yellen and Draghi’s Jackson Hole speeches on Friday. EZ econ data Thursday were below f/c, again, and USD data were all better than expected, but there weren’t enough new, eager EUR/USD sellers to retest the o/n lows. Those lows landed between the 38.2% of the ’12-’14 rise at 1.3249 and the 61.8% of the ’13-’14 rise at 1.3219. Offers aplenty are noted at 1.3285-300 and again into the weekly Cloud base at 1.3317 and 1.3330, with stop above there. The thinking is Yellen will have to be very convincing in her arguments against tightening too soon to weaken the dollar. Another view is that in the dual contest for yield & safety, the USD still wins versus the EUR and the yen, regardless, and that Draghi will be dragged kicking and screaming toward QE over the M-T. Keep in mind that the real cost of EZ govt debt servicing has fallen from post-crisis peaks, but remains well the ’12 lows and prevailing pre-crisis levels.