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EUR/USD weak fundamentals and mixed technical outlook - Scotiabank

FXStreet (Barcelona) - Camilla Sutton, CFA, CMT, Chief FX Strategist at Scotiabank noted the recent conditions surrounding the events of the Eurozone and effects on the EUR/USD.

Key Quotes:

"The market digests the release of the bank stress tests. The reaction in both currencies and bonds has been modest.

"Summary of the bank stress tests results:
25 banks out of 130 failed the stress test, with a capital shortfall of €25bn. 12 of those banks have already raised the needed capital. 13 banks are left to raise €9.5bn in capital; with Italian banks in the worst position."

"A disappointing German IFO, which softened to 108.4 on the current assessment and 98.3 on the expectations, highlights falling business confidence, which is concerning for the economic outlook”.

“The fundamentals of the Eurozone remain EUR negative with this week’s fundamental test being the Fed meeting and the release of the flash CPI estimate. We hold a year‐end EUR target of 1.2500."

"EUR/USD short‐term technicals: mixed—as EUR trades at the mid‐point of its month‐long 1.2501 to 1.2901 (400 point) range and technicals provide conflicting signals. Support lies at 1.2600, resistance lies at 1.2740."

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