EUR/USD appears neutral in the short term – Scotiabank
Chief FX Strategist at Scotiabank Shaun Osborne suggests the pair should find decent support in the 1.1720/30 band.
“EURUSD looked in fine form yesterday but is a bit less impressive today after giving back all the intraday gains through the close last night. The EUR has some clear deficiencies – wide and negative rate differentials versus the USD – but markets are well aware of such negatives and they have not prevented the EUR from strengthening in the past few months. We think improving Eurozone growth momentum serves as fundamental support for the EUR, however, and generally feel international investors and portfolio managers are moving to rebuild relatively low exposure to Eurozone assets. Inflows will help lift the EUR despite negative rate spreads”.
“EURUSD made solid progress through key technical points this week but it is hard to ignore yesterday’s stall in the upper 1.18s and the slide back to opening levels through the close. That leaves a potentially negative “doji” candle on the daily chart and suggests the rally has stalled (at least) for now. Short term patterns point to a retest of the low 1.17s now and we expect firm support on dips to the 1.1720/30 area”.