EUR/USD RSI underpins bearish outlook - Scotiabank

Analysts at Scotiabank explained that interest rate differentials remain a drag and the 2Y U.S.-Germany spread has blown out to fresh decade lows beyond -160bpts.

Key Quotes:

"The 10Y spread is pushing toward levels last seen in the late 1980s.

Measures of implied EUR volatility are climbing and risk reversals suggest a rising premium for downside protection. Sentiment and fundamentals are aligned for continued EUR weakness."

"EUR/USD short-term technicals: bearish—momentum signals are bearish and the RSI is in oversold territory.

There are no meaningful technical support levels ahead of the December 2015 low at 1.0524

Note that the RSI has pushed well below 20 in several instances over the past few years (once in 2014, twice in 2015)."