Euro: Consolidation with downside risks against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret note the Euro (EUR) is consolidating in a tight range around the mid-1.15s as markets await the Federal Open Market Committee (FOMC). They note Eurozone Industrial Production data had little impact on sentiment, while implied volatility suggests a modest move is priced. Their technical view points to a pause before renewed EUR/USD losses toward the 1.1450–1.1475 area if support breaks.

Range trade before potential decline

"The EUR is holding a tight range ahead of the FOMC. Eurozone July Industrial Production fell 0.1% in the month, slightly better than forecasts of a 0.2% drop. The data had no impact on EUR sentiment."

"Overnight EUR vol has firmed modestly, implying a breakeven move in spot of about 50 pips. That’s a bit below recent peaks suggesting markets may have largely priced in a hawkish Fed outcome."

"EUR/USD short-term technicals: Neutral/bearish—Spot is consolidating in a tight range around the mid-1.15s."

"Short-term price patterns suggest a pause in the EUR’s recent softness, ahead of renewed losses."

"EUR weakness below 1.1515/20 targets a further decline to 1.1450/75. Resistance is 1.1565/75"

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)