Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is modestly higher versus the Dollar, supported by risk sentiment around the US/Iran conflict despite softer German trade data and slightly reduced ECB tightening expectations. Short-term technicals are described as bullish, with EUR/USD above key Fibonacci levels and rising RSI, opening scope for a move back toward the January high above 1.20.

Bullish structure targets January highs

"The EUR is up 0.4% vs. the USD, a mid-performer among the G10 currencies as it continues to be driven by – and recently buoyed by – broader market sentiment as it relates to the US/Iran conflict. Yield spreads have pulled back, reflecting a slight moderation in expectations for ECB tightening with June now priced at 19bpts – down about 10bpts from the hawkish peak that followed the April 30 policy meeting."

"Risk reversals are confirming the support from sentiment, as the options market continues to fade its modest premium for protection against EUR weakness with scope for continued support as premiums shift toward upside protection (as observed in late 2025/early 2026)."

"Fundamental releases have been limited to weaker German trade data, reflecting a surge in (energy) imports in March, and the EUR appears to be ignoring the prospect of renewed trade tensions following President Trump’s latest threats of tariff hikes by July 4."

"Bullish – the EUR’s recent gains are important, as we look to key technical levels drawn from the Jan-March pullback. The latest recovery has followed a test of critical support in the mid/upper-1.16s around the 38.2% Fibo retracement of the Jan/Mar decline, and tentative gains have pushed above the midpoint (1.1746) toward the 61.8% Fibo at 1.1825."

"The RSI is bullish, in the upper 50s, and we see an increasing likelihood of a full retracement and a push back to the January high above 1.20. We look to a near-term range bound between 1.1720 and 1.1820."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)