EUR holds gains as Fed/ECB spread widens – Scotiabank

The Euro (EUR) is consolidating this week’s advance, supported by widening rate differentials and a neutral ECB outlook, with little reaction to soft euro-area data. Bullish momentum is intact after clearing the 50-day MA, with the EUR now tracking a 1.1650–1.1750 range and eyeing resistance toward 1.18, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Euro steady ahead of Lane’s speech

"The EUR is quietly consolidating this week’s gains and entering Thursday’s NA session flat vs. the USD. Fundamentals remain supportive, as interest rate differentials reflect expectations for renewed dovishness at the Fed and a neutral policy outlook for the ECB. Yield spreads are up on the week, pushing to fresh 14 month highs and threatening a break to levels last seen in mid-2023."

"We note the absence of any material reaction to the release of as-expected euro area retail sales data for October (0.0% m/m) and see near-term headline risk centered around the ECB with a focus on Chief Economist Lane’s speech scheduled for 10am ET."

"The EUR’s latest gains have delivered a clear break of the 50 day MA (1.1612) as well as the mid-November highs in the mid-1.16s. The RSI is above 60 and confirming the EUR’s bullish momentum. We note the potential for near-term resistance at 1.17 and 1.1750 and highlight the importance of 1.18 as the next major resistance level. We look to a near-term range bound between 1.1650 and 1.1750."