Euro: Recovery holds within 1.15–1.16 band against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret describe the Euro (EUR) as steady in the mid-to-lower 1.15 area, trading close to fair value based on 2-year US–Germany spreads. Fundamentals and sentiment are seen as constructive, underpinning EUR recovery since early Q3. Short-term technicals are bullish, with resistance around 1.1550 and a preferred near-term range between 1.1500 and 1.1600, ahead of the 200-day MA at 1.1630.

Bullish tone with defined resistance levels

"The EUR is steady, extending its latest consolidation in the mid/lower1.15 area. The final services and composite PMI’s offered a fractional improvement on the preliminary prints, indicating marginal levels of growth across the euro area, despite a slight contraction in France and Germany in July."

"The EUR is trading in line with a narrow FV estimate tied to 2Y spreads between the US and Germany, offering little in terms of directional risk from a fundamental perspective. The trend in both fundamentals (spreads) and sentiment (risk reversals) is constructive, providing a solid basis for the EUR’s latest recovery since the start of Q3."

"Bullish – the EUR’s latest recovery has been important, delivering a clear bullish shift in momentum and a break of trend resistance with the push above the 50 day MA (1.1476)."

"Short-term price action has revealed additional near-term resistance around 1.1550, however we see nothing major ahead of the 200-day MA at 1.1630. We look to a near-term range bound between 1.1500 and 1.1600."

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