EUR/USD: short-term trends have turned more constructive  - Scotiabank

Shaun Osborne, Strategist at Scotiabank, noted that short-term trends have turned more constructive for EUR/USD this week although Eurozone-US short-term spreads remain highly unfavourable for the EUR.

Key Quotes

“Eurozone data revealed a larger than expected drop in French unemployment (u/rate fell to 9.9% from 10.2% and 10.1% expected) while the ECB current account data produced a slightly narrower surplus for June (EUR 28.2bn). The fine print showed what appears to be healthy levels of portfolio and direct investment inflows into the Eurozone which perhaps help explain the EUR’s resilience to weak growth and inflation fundamentals.” 

“Eurozone-US short-term spreads remain highly unfavourable for the EUR, however; the equation of strong financial inflows and weak interest rate differentials may keep EUR/USD range-bound (broadly) for some time.” 

“EUR/USD short-term technicals: neutral/bullish—Short-term trends have turned more constructive for EUR/USD this week. The market is trading well through short and medium-term moving averages and is benefitting from positive trend strength signals on the shorter-term oscillators.” 

“Establishing a foothold above 1.13 challenges our broader, bearish view in a significant way and renders the medium to longer-term picture more neutral. We still rather think May’s turn lower from 1.16+ formed a major bear reversal signal and remains a significant block on the EUR’s potential to strengthen in the longer run. However, for now, we may trade 1.12/1.15, rather than the 1.1050/1.1250 range we outlined recently.”