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Talking Points:

- EURUSD bearish below former yearly lows $1.3475.

- EURGBP, EURJPY may have different ideas in the ST.

- EURAUD completed the head and shoulders pattern at A$1.4210.

The Euro is showing signs of life, just not against the US Dollar. In fact, with so much US event risk the next few days, EUR-biases may be best expressed elsewhere. With ADP/GDP/FOMC/NFPs/ISM the next few days on the US economic calendar (oh, the acronyms), it may be time for EUR traders to look into currency baskets as a way to diversify away non-EUR risk.

With respect to the Euro specifically, the market's focused is honed in on inflation, so the Q2 Spanish GDP report due tomorrow might be overlooked entirely, barring a significant deviation from estimates (expected +0.4% q/q unch).

The market cares more about inflation ever since the regional liquidity issues were addressed; the narrower interest rate corridor has kept interbank lending rates (EONIA) pinned near zero, currently 0.043%.

The most important release for the Euro this week is the Thursday release of the July Euro-Zone Consumer Price Index, which will show that the European Central Bank’s latest easing measures have had little impact so far, leaving the picture gloomy for the Euro.

Headline inflation is expected unchanged at +0.5% y/y, and core inflation is due at +0.8% y/y. The coming days should test the market’s mettle for the weak growth, disinflationary environment gripping the region, as calls for non-standard easing measures have started to grow.

Read more: Fed, NFPs Line Up this Week with USD Technical Breakouts

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