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EUR/USD points southwards near term – Scotiabank

FXStreet (Edinburgh) - Eric Theoret, Currency Strategist at Scotiabank, suggested the near term outlokk on the pair remains tilted to the bearish camp.

Key Quotes

“While Fed‐speak has impressed on the market that rates still risk moving higher this year, ECB officials have taken the opposite track and reminded markets that they are prepared to do more if the central bank’s inflation mandate is at risk”.

“German five‐year yields edged back under zero percent yield today. Two‐year bond spreads are wider by 8bps from Friday’s levels and the broader levels of spreads (the biggest yield gap since 2007) are a major drag on the EUR’s performance”.

“Based on regressions of short‐term spreads alone, we estimate that EURUSD should be trading at 1.0960 today”.

“Trend momentum signals are aligned bearishly on the short‐ term charts and longer‐term supports highlighted above are at risk. We think intraday weakness below 1.1160 may see losses pick up. Resistance is 1.1215/25”.

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