EUR Trading Outlook (10-12-2014)

EUR/USD Broad based USD weakness in Europe’s morning saw EUR/USD’s short squeeze from Dec 8 persist a bit further. The rally, seemingly driven more by positioning than anything else, lift from below 1.2320 towards 1.2355 into NY’s open. Shorts pushed the pair again in early NY. US yields began a serious slide and this put massive pressure on USD/JPY which inspired USD longs to cover across the board. EUR/USD paused briefly by the 200-HMA but the resistance broke and stops above 1.295 were run. The squeeze accelerated at that point and the pair quickly hit a 1.2448 high. Offers near the 21-DMA and TL off October’s high stalled the rise. A rebound for US bond yields, stock and the USD then saw the pair slip for its high. Late in the day the pair slipped back towards the 200-HMA and sat just below 1.2380. Trades will keep a keen eye on China’s CPI data tonight. A soft number is likely to have a knock-on effect with EUR as the EZ’s inflation outlook softens. A soft CPI tonight might see risk hit and much of EUR/USD’s gains from today eroded.