EUR/USD neutral/bearish near term – Scotiabank

In view of Shaun Osborne, Chief FX Strategist at Scotiabank, spot should find resistance in the mid-1.1800s in the near term.

Key Quotes

“The EUR staged a modest relief rally yesterday after the Catalan regional government appeared to stop short of declaring independence from Spain. The issue remains fraught, however, with Madrid seeking clarification on the Catalan position and starting the process, which will impose direct control from the central government on the region. For now, however, investors feel that a period of calm may prevail, allowing the EUR to steady. We note that Eurozone-US spreads at the shorter and longer end of the rate curve remain widely in favour of the USD, however, and may preclude significant EUR gains for the moment”.

“Spot gained through short-term resistance at 1.1825 overnight but the market failed to sustain the rise and the drift lower through European trade suggests a short-term peak via an “evening star” reversal on the hourly chart. The EUR is finding support in the low 1.18s but risks dipping lower on a break of short-term trend support at 1.1805. We see resistance now at 1.1850”.