EUR/USD could test 1.1100 near-term – Scotiabank

Chief FX Strategist at Scotiabank Shaun Osborne sees the likeliness of a test of the 1.1100 area in the short run.

Key Quotes

“EURUSD is trading softly as UK referendum fears weigh on spot directly and cross-related selling (EURJPY, EURCHF safe haven demand) add to downside momentum”.

“Eurozone-US short-term spreads continue to shrink as investors push US yields lower but we doubt the narrow yield differential will have much impact on spot at the moment. EURUSD remains overvalued relative to our equilibrium estimate (1.0470) by quite a margin”.

“Downside momentum has picked up on the short-term charts with the EUR now having given back around 3/4 of the rally seen a week ago Friday (NFP day). Loss of moving average support in the high 1.12/1.13 area this week is a negative signal for the EUR and we look for the market to continue to pressure lower towards key channel support at 1.11 in the days ahead. We see strong resistance now at 1.1275/00”.