EUR/USD neutral/bullish near term – Scotiabank

The pair’s outlook is seen neutral/bullish in the short-term horizon, noted FX Strategists at Scotiabank.

Key Quotes

“EUR is also quietly consolidating just below 1.17 while respecting near-term support around its 50 day MA. The latest round of manufacturing PMI’s were largely in line with expectations, confirming the flash releases and the apparent stabilization in euro area growth following the early 2018 disappointment. ECB rate expectations are firming and German yields are recovering. Yield spreads are showing signs of a decisive turn from their extended levels and narrowing in a EUR-supportive manner as correlations recover. Measures of sentiment are also supportive as risk reversals show a continued erosion in the premium for protection against EUR weakness”.

“EUR has yet to deliver a decisive break of its one month range roughly bound between the upper 1.15s and 1.1750 however the broad turn in technical signals suggests a clear shift in the balance of risk. The longer-term monthly chart is suggestive of indecision with a pair of doji’s observed in both June and July. We anticipate a bullish resolution to the symmetrical triangle that has been formed in the period since mid-June”.