Euro: Consolidation holds in mid 1.15s against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Euro (EUR) is steady, extending a tight consolidation around the mid-1.15s after the Dollar’s late-July Fed-driven decline. EUR/USD trades close to a fair value estimate based on 2-year Germany–US yield spreads, with sentiment-driven correlations strengthening and a quiet data and European Central Bank (ECB) calendar pointing to continued range trading.

Euro steady in tight range

"The EUR remains steady as it extends its tight consolidation in the mid-1.15s, with limited overall movement observed in the period following the USD’s broad Fed-driven decline from late July."

"The EUR continues to trade in tandem with a narrow FV estimate based on 2Y Germany-US yield spreads, currently at 1.1563."

"Correlation studies reveal a moderation in fundamentally- (spread) driven movement, while correlations to sentiment (risk reversals) are elevated and strengthening."

"Bullish/neutral – the EUR’s bullish momentum is fading, with the RSI drifting into the upper 50s. The recovery from late July has shown signs of deceleration while still maintaining a marginal bull trend with a sequence of higher highs and higher lows."

"Recent resistance has been observed around 1.1580 and we see additional resistance closer to 1.1600 and the 200 day MA at 1.1630. Support is expected at the 50 day MA at 1.1468. We look to a near-term range bound between 1.1500 and 1.1580. "