EUR/USD gains likely to be limited above 1.1250 - Scotiabank

Despite the euro is outperforming today, Eric Theoret, Strategist at Scotiabank notes that gains are likely to be limited above 1.1250 and the short-term technical perspective remains bearish.

Key Quotes

“EUR is outperforming, strengthening in response to better than expected IFO sentiment figures from Germany.”

“Relative central bank policy is likely to be this week’s dominant driver for EUR, as we look to a pair of public appearances from ECB President Draghi ahead of Friday’s highly anticipated CPI release, with headline inflation expected to rise to 0.4% y/y at the upper end of its multi-year range. The 2Y Germany-U.S. yield spread remains extended beyond –140bpts, and risks widening to levels last seen in 2006. The balance of risk for EUR is biased to the downside.”

“EURUSD short-term technicals: bearish—EUR gains are likely to be limited above 1.1250, a level of resistance that has served to restrain EUR strength through much of September. Momentum signals are remarkably neutral and the ADX is trendless (under 25) at 16. We look to weakness back toward the 200 day MA around 1.1150.”