EUR/USD retains a weak undertone - Scotiabank
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Heavy losses yesterday and no real bounce into the end of the week suggest that EUR/USD may be on the cusp of another biggish shunt lower, said the Scotiabank analyst team.
Key Quotes
“EURUSD retains a weak undertone after yesterday’s sharp slide off the immediate post-meeting highs. Thursday’s drop was the largest one-day (exBrexit) fall in EURUSD since the Oct 2015 ECB policy announcement when President Draghi indicated more policy easing steps were likely at the end of the year.”
“German trade and French IP data were weaker than expected today but the data is not the focus for the markets right now. Rather, it is policy divergence and a renewed widening in Eurozone-US short-term rate spreads (2Y bond differentials at 185 this morning versus 175 right after the ECB announcement yesterday) that are driving spot.”
“EURUSD short-term technicals: bearish—Heavy losses yesterday and no real bounce into the end of the week (so far) suggest that EURUSD may be on the cusp of another biggish shunt lower. We have been longer-term technical bears on the EUR for a while and feel that yesterday’s test and rejection of 1.08+ levels reaffirms the broader bearish undertone. We target a drop to 1.0075/1.01. We spot strong resistance at 1.0630 now and expect sellers to fade modest EUR rallies while this level holds.”
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