EUR Trading Outlook (02-09-2014)

EUR/USD Sentiment towards the EUR remains extremely negative and the market continues to add to already large EUR short positions. The EUR is being used as a funding currency for carry trades, as EZ short-term yields continue to disappear, and was pressured by carry trade demand overnight and into Europe, as EUR/AUD; EUR/NZD and EUR/CAD selling flows were noted. The uncertainty surrounding the Ukraine/Russia crisis also adding to the bearish sentiment as further EU sanctions against Russia will negatively impact the already fragile EZ economy. As the European session got going a bout of short covering out of Asia provided scope for a modest rebound to 1.3146 and this from a new 12-month low of 1.3120.