EUR/USD points to further downside – Scotiabank

Chief FX Strategist at Scotiabank Shaun Osborne has reiterated the neutral/bearish outlook for the pair in the near term

Key Quotes

“Eurozone/US short-term yield spreads have widened modestly in the USD’s favour in the wake of the jobs data but the spread is not making new ground and movement is sufficient to keep the EUR capped, rather than push spot significantly lower at this point”.

“The growth/policy divergence trade remains alive, however, and we continue to favour EUR weakness over the balance of the year”.

“EURUSD recovered precisely 50% of the sharp sell-off seen Friday morning before consolidating and moving sideways Monday and through today so far”.

“The broader technical picture remains negative, from our perspective, however, and we continue to view EUR gains to the mid/upper 1.11 area as unsustainable (55-day MA at 1.1160 figures as strong resistance)”.

“Near-term, we look for tight range trading around 1.11 to persist but we think longer-term technical factors favour EURUSD weakness moving forward”.