EUR/USD neutral near-term, supported below 1.12 – Scotiabank

Chief FX Strategist at Scotiabank Shaun Osborne keeps the neutral view on the pair in the near term.

Key Quotes

“Spot is showing little appetite for movement outside of established ranges. The market has eased modestly from the mid 1.12 area through European trading as local bank stocks wilted”.

“The EUR seems more immune to the challenges of the local banking sector at the moment”.

“We think spot still looks “rich” relative to fair value, based on Eurozone/US spreads and equity returns; our model suggests equilibrium based on these variables is a little under 1.06 currently, however”.

“The broader technical position here remains little changed. EURUSD has weakened modestly on the day but recent range parameters remain intact”.

“After two tests, and rejections, of 1.1270 earlier this week, the EUR’s drop to the intervening low at 1.1220 sets up a potential short-term double top (implying scope for a push lower to 1.1170 on a break lower). However, the market’s initial dip to the low 1.12 zone looks to be drawing decent support”.