Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is weaker, down about 0.5% versus the US Dollar (USD), as risk aversion supports broad USD strength. Yield spreads imply a fair value near 1.1633, while data have been light ahead of Tuesday’s ZEW survey. They highlight major support around 1.15 and only limited near-term resistance before 1.1650, with European Central Bank (ECB) rhetoric turning more hawkish on energy-driven inflation.
"The EUR is weak and entering Monday’s NA session with a notable 0.5% decline a mid-performer among the G10 currencies in an environment of broad-based USD strength marked by risk aversion. Sentiment is dominating as yield spreads remain relatively well supported, offering a narrow FV estimate based solely on yield spreads (2Y Germany-US) at 1.1633."
"Fundamental releases have been limited and we continue to highlight the importance of Tuesday’s ZEW investor sentiment survey, a noted leading indicator for industrial production (by about 12-18 months)."
"Hawkish comments from the ECB appear to be intensifying in response to the latest rise in energy prices, with Executive Board member Schnabel characterizing the increase as ‘quite concerning’."
"The latest decline has dragged momentum into the low 40s, reflecting spot’s decline to its 50 day MA at 1.1531. We see major support at 1.15 and see limited near-term resistance ahead of 1.1650."
"Neutral/bearish – the RSI has swiftly fallen into bearish territory following a brief push above the overbought threshold at 70—reached in late August."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)