EUR Trading Outlook (10-10-2014)

EUR/USD Persistent USD weakness in Europe’s morning saw Asia’s gains added to. EUR/USD rallied to a 1.2791 high before dipping near 1.2760 into NY’s open. The USD recovered after USD/JPY failed to clear 107.50 and US bond yields took back early losses. EUR/USD slid from the NY open and never looked back. The pair tested support near 1.2710 before a slight bounce took hold. Germany’s Schaeuble hit the wires noting that ‘if we don’t stick to the EU budget rules, monetary union doesn’t work.’ He also noted that the European situation will change when France & Italy implement structural reforms. Draghi then spoke. He noted reform is needed & Gov’ts with the fiscal space should use it. EUR/USD slid on these remarks. The slide gathered pace as JPY strength drove EUR/JPY through 137.30/35 to an eventual low of 136.66. EUR/USD follwed & hit a low of 1.2664 before bouncing back near 1.2685 late in the day. The 10-DMA and Oct 8 low are s-t support. Breaks of them may mean the short squeeze is over. A return the 1.25 may then occur.