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Euro Faces Reversal Risk After Near-3% USD Rally

Scotiabank said EUR/USD is entering the NA session slightly weaker, down 0.1% versus the USD, as German data and political risk drive investor focus.

Reported · Written up by our desk · Major Pairs

Scotiabank strategists Shaun Osborne and Eric Theoret highlighted that EUR/USD has turned defensive after an almost 3% rally from late July, with the euro described as softer against the US dollar.

They pointed to Germany IFO business sentiment as the week’s key fundamental release, scheduled for Tuesday, while noting that yield spreads have pulled back as US Treasury yields climbed over the past week.

The strategists also cited rising political risk, including wider intra-euro government bond yields, with a blowout in the bund-BTP spread and attention on French budget negotiations and polls showing solid potential results for far right candidate Marine Le Pen.

On the technical outlook, EUR/USD remains bullish, with resistance above 1.1700 and support around 1.1580 to 1.1600, and they flagged limited further resistance ahead of 1.1800.

Latest closeEUR/USD 1.157 ▲0.4%

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