EUR/USD: technicals suggest rallies are a sell - Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank, noted that EUR/USD short-term picture is quite mixed but broader risks are still angled lower.

Key Quotes

“EUR/USD wobbled a little yesterday as investors drove spot below 1.11 but there was little follow through selling interest and the market remains essentially range bound.”

“Overnight, the EUR barely reacted to a modest downward revision to the June French CPI data ( a tenth to +0.1% m/m) and disappointing Eurozone industrial production data for May (-1.2% m/ m versus -0.8% expected). Eurozone short-term rates continue to slide (1m Euribor at -0.37%) which is exerting some pull on EZ-US spreads down the curve; 2Y bond spreads are a tad wider at 135 bps this morning and should pull EUR/USD lower.”

“EUR/USD short-term technicals: neutral/bearish—The short-term picture is quite mixed; the sell-off from 1.11+ yesterday leaves a heavy look to daily chart and the break under support in the upper 1.10 area more or less reached its short-term objective overnight. However, the decent bid evident off the low/mid 1.10 area overnight suggests firm support has developed around 1.1045/50 now.”

“Broader risks are still angled lower after the break under channel support in late June but the market may remain 1.1050/1.1150 for the next day or so. Technicals suggest rallies are a sell.”