EUR/USD needs a break from the recent range - Scotiabank

Shaun Osborne, Strategist at Scotiabank, notes that EUR/USD remains range-bound with a neutral to negative outlook, but a break from the recent range is needed to boost participation and confidence in a sustained directional move, one way or the other.

Key Quotes

“EUR/USD is range-bound. Market sentiment is bearish on the EUR but there is little real conviction behind positioning at the moment. Short-term yield differentials remain adversely positioned for EURUSD, with 2Y bond spreads at a premium of 142bps for the USD – near recent record peaks – while weak local banks stocks are an additional, potential burden.” 

“A break from the recent range is needed to boost participation and confidence in a sustained directional move, one way or the other, however.” 

“EURUSD short-term technicals: neutral/negative—Spot squeezed a little higher in overnight trade to the low 1.12s but quickly reversed lower, leaving some negative technical prints on the intraday charts. Price action looks soft but directional momentum is weak. Short-term price moves suggest downside risks remain more significant, as spot is consolidating losses from the mid-September highs in a bear flag formation on the hourly chart. Below support at 1.1175 intraday should see a little more pressure brought to bear on major supports in the low/mid 1.11s.”