EUR Trading Outlook (09-12-2014)

EUR/USD Europe drove EUR/USD towards the mid-Aug 2012 low as JPY strength sent EUR/JPY plunging through 149.10/15 support. Bears took EUR/USD to a 1.2247 low but couldn’t muster further losses as broad based USD weakness trumped JPY strength. EUR/USD lifted towards 1.2270 into NY’s open. The pair’s lift gathered pace after USD/JPY broke below 121.00 and was unable to regain ground above there. EUR/USD’s rally extended, ran weak stops above 1.2310/15 and eventually hit a session high of 1.2344. Profit taking from intra-day USD shorts allowed for a bounce and EUR/USD slipped back near 1.2320 towards the end of the day. The risk of further short covering exists as there are no major data points out of the US or EZ until later in the week and technicals suggest a lift is due. Day/week RSIs diverged on the new low and yield spread widening has slowed a bit. A test of the 1.2505/35 area cannot be ruled out as we head into Nov CPI reports out of the EZ, US retail sales and the ECB’s TLTRO report on Thursday. The long-term outlook remains bearish though and only a move above 1.30 puts doubts into the l-t bear trend.