EUR/USD short-term outlook remains bearish – Scotiabank

Eric Theoret, FX Strategist at Scotiabank, noted EUR/USD keeps its bearish stance in the short-term.

Key Quotes

“Interest rate differentials remain a drag for EUR with a 2Y Germany-U.S. spread pushing decade lows under -160bpts. Risk reversals are also suggestive of rising demand for protection against EUR weakness as premiums for longer time horizons reach levels last seen around Brexit. We remain bearish EUR on the basis of relative central bank policy and hold a year-end target of 1.05”.

“EUR gains failed above 1.08 and the near-term balance of risk appears to be shifting back to the downside. Monday’s break of the January lows has seen EUR hit fresh 2016 lows just above 1.07. The breach opens up the potential for a full retracement of the rally from December 2015. We look to EUR downside toward the December 2015 low at 1.0524”.

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