FX Strategists at Scotiabank noted there is room for spot to slip back to sub-1.2300 levels in the near term.
Key Quotes
“Eurozone PMI data reflected a deceleration in services and manufacturing activity in both Germany and France in Mar, resulting in larger than expected dips in preliminary Eurozone PMIs (services, manufacturing and composite). The data look somewhat disappointing but reflect a gearing down in the indices from very elevated (historic) levels. The ECB reported a large jump in the Jan Eurozone current account in Jan (EUR37.6bn) which may have made policy makers cringe, given the more hostile trade environment these days. EURUSD remains impervious to the huge, negative Eurozone-US yield differential (-290bps). Intraday losses rather reflect short-term profit-taking and position adjustment following the rally from the low 1.22s in the last 24 hours”.
“EURUSD rose strongly yesterday but the broader range remains intact and spot continues to gravitate around the 1.2350 area. Intraday price signals are negative, however. The 6-hour chart reveals a stall in the mid/ upper 1.23s and turns lower (outside range session) which suggests near-term risks are geared towards a retest of the upper 1.22s. We continue to expect solid support in the mid/upper 1.22s”.
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