EUR Trading Outlook (16-09-2014)

EUR/USD Europe applied pressure to EUR. It was mostly on the crosses but EUR/USD did feel the effects. EUR/GBP slid from 0.7984 towards 0.7945 and EUR/JPY slid towards 138.45. EUR/AUD sales from HFs also added pressure. These sales saw EUR/USD fall from near 1.2965 to below 1.2920 before the pair bounced towards 1.2925 into NY’s open. NY pressed further as EUR cross sales persisted, with EUR/AUD sales by HFs the standout, and EUR/USD hit 1.2909. The weak US IP data added pressure to already soft US bond yields and the USD saw some broad based sales. EUR/USD rebounded and some short covering took hold. The s-t macro accounts were noted buyers covering and the pair rallied to a NY high of 1.2952. The USD staged a bit of a comeback and the pair slid below 1.2940 where it sat late in the session. Further short covering cannot be ruled out ahead of major event risk as the mkt still has a large net-short EUR position. The Fed meets Wednesday and the ECB’s first round of TLTROs is scheduled. The mkt seems to have built in some hawkish sentiment from the Fed. If it doesn’t materialize USD longs are likely to bail out. If the TLTRO take up is light EUR shorts likely get squeezed.