EUR Trading Outlook (21-08-2014)

EUR/USD Oversold or not, and with net spec EUR IMM shorts near ’12 wides, the surprise for some this week is the renewed breakdown in the EUR/USD sans a meaningful correction. Today’s drubbing began with barriers and stops at 1.3300 knocked out, reportedly after ACB offers ran over RM and spec buyers. That move took prices below the Nov ’13 lows at 1.3295 and threatens a weekly close below the weekly Cloud base at 1.3317, which would be a major technical blow. Prices have resumed their fall in the NY afternoon after FOMC Minutes revved up rate hike/tightening and even eventual balance sheet contraction speculation. The US curve steepened via higher S-T rates, leaving EUR/USD in the 1.3250s, with talk of another barrier at 1.3250. A weekly close below 1.3300 would open the door to a M-T retest of the Apr ’13 nadir & lower 100-wk Bolli in the mid 1.2700s. There’s been speculation of late about the EUR becoming a favored funding currency, but the yen won that contest hands down today, putting the 137.63, the 23.6% of 143.79-135.73 slide, back in play. EUR Markit PMIs are on tap Thur, along with US Claims, Philly Fed & Existing Home Sales.