EUR/USD: downside risk to 1.02 lows in Q1 and Q2 2017 - Scotiabank

Eric Theoret, Strategist at Scotiabank noted that they remain biased to medium-term EUR weakness on the basis of relative central bank policy, flagging downside risk to the official forecast 1.02 lows in Q1 and Q2 2017.”

Key Quotes

“EUR is up 0.4% vs. the USD, a mid-performer in an environment of broad-based USD weakness. The outlook for relative central bank policy remains dominant, as EUR continues to trade in tandem with the 2Y Germany U.S. yield spread.”

“Stronger than expected money supply figures helped provide for additional EUR gains as market participants responded to the partial reversal of the prior drop. We remain biased to medium-term EUR weakness on the basis of relative central bank policy, flagging downside risk to the official forecast 1.02 lows in Q1 and Q2 2017.”

“EURUSD short-term technicals: bearish—EUR is stuck in a two week range roughly bound between support around 1.0350 and resistance near 1.05. The broader technical picture is bearish across both trend and momentum indicators. We look to a break of the Dec 20 low.”