EUR Trading Outlook (08-10-2014)

EUR/USD Asian names sold the spike higher to 1.2665 in Europe’s morning. The slide saw EUR/USD dip to 1.2585 just before NY got going. NY walked in and immediately rallied the pair towards 1.2625. US bond yields were soft and USD/JPY slid closer to the all important 108.00 area. EUR/USD’s rally pushed to 1.2655 before EUR/JPY weakness took control. That pair slipped from near 136.95 to a low of 136.56. EUR/USD dipped to 1.2615 but the dip met buyers. Persistent yield weakness had the USD on its heels vs. most major currencies. EUR/USD rallied towards Europe’s high and sat just below it late in the session. There is no major data due that would seriously impact the pair so the recent short squeeze may persist. Technicals & yield spreads back up that view. Day/week o/s unwinds continue and spreads are narrowing. The 10-DMA is capping gains for now but a clear break puts 1.2700/15 in play. Longer-term bears likely sit there but a break of that latter level may inspire a much bigger squeeze and put 1.2850/1.2900 in play.