EUR/USD unlikely to extend gains much further – Scotiabank

Shaun Osborne, Chief FX Strategist at Scotiabank, sees the pair’s outlook still on the neutral/bearish side in the short-term.

Key Quotes

”Eurozone-US 2Y yield spreads have contracted modestly following the US Q2 GDP disappointment but, with the yield gap still near 130bps and within recent ranges, we see no grounds for the EUR to appreciate significantly at this point. In fact, our fair value model still suggests spot is relatively “rich” to our estimated equilibrium (1.08)”.

“We retain a negative, longer-term technical perspective of EURUSD and note that this week’s rebound is showing signs of struggling as the market nears the retest of the late June channel breakdown at 1.1248 (note the 100-day MA at 1.1237 helped cap the market yesterday). Short-term momentum does look constructive but we still rather think near-term gains are likely to struggle to extend. We see support at 1.1150/60”.