EUR/USD finds strong support at 1.0495/1.0525 – Scotiabank

According to Shaun Osborne, Chief FX Strategist at Scotiabank, the pair should be well supported in the 1.0495/1.0525 in the near term.

Key Quotes

“O/n EUR vol has picked up a little, suggesting markets are factoring in heightened event risk but vols are still well below peaks seen around the last FOMC meeting. A fed hike today should solidify the recent widening in EUR/USD short-term spreads but additional spread widening may be hard to achieve without an overtly hawkish message from policy makers. Still, current 2Y differentials around 215/220bps are solidly supportive for the USD (middle chart) and spreads above 200bps suggest little real downside risk for the USD in the near term”.

“EURUSD tested the 1.06 area in late trade yesterday but the figure held and the market bounced modestly to the 1.0640 zone through the overnight market. Short-term price action suggests a minor high in place for spot here now, however, and a modest downside bias to retest 1.06 should develop today. We see some retracement support at 1.0595 (50% retracement of the squeeze up from the low 1.05s to the 1.0712 high. We see firm resistance at 1.0700/10 now and major resistance at 1.0820/40. Major support is 1.0495/1.0525”.