EUR Trading Outlook (21-10-2014)

EUR/USD Europe bought the dip presented to them as they walked in the door. General USD weakness saw short covering take the pair form near 1.2735 towards 1.2770 into NY’s open. Early NY saw a spike up to 1.2790 get rebuffed. A bout of JPY strength drove EUR/JPY from near 136.70 to a NY low of 136.27. EUR/USD drifted lower to test hourly support near 1.2750/55. The dip was bought though as USD weakness dominated and improved risk sentiment sent stocks higher. EUR/JPY rallied off its NY low and sat just above 136.80 late in the day. EUR/USD lifted off the NY low, cleared the overnight high and touched 1.2811. Very little pullback was seen and the pair sat just below 1.2810 late in the day. shorts may get squeezed further after the pair bounced nicely off the 10-DMA. Day/week RSIs are biased up and spreads hold near recent tights. If China’s Q3 GDP should see an upside surprise, risk may rally strongly and EUR/USD may get take higher.A test of 1.2900 resistance may then take hold. Should that resistance give way there isn’t much to stop a bigger squeeze until the 1.30 area where the 55-DMA& Sept high sit.