EUR/USD Forecast: Scotiabank Sees $1.1275 Capping Euro-Dollar Rebound
The Euro recovered more than half of Friday’s loss against the US Dollar, but Scotiabank sees weak momentum keeping EUR/USD below $1.1275 for now.
The Euro to Dollar exchange rate rose to $1.1193 on Monday, up 0.48% from Friday’s close of $1.1140, as the US Dollar weakened against most major currencies.
Euro to Canadian Dollar (EUR/CAD): 1.582295 (+0.54%)
Dollar to Canadian Dollar (USD/CAD): 1.41272 (0.00%)
The rebound took the Euro almost exactly back to where it finished the previous Monday. For Scotiabank, that week of trading captures the difficulty facing both buyers and sellers. The Euro has repeatedly found buyers in the low $1.11s, but its rallies have stalled before $1.13.
Monday’s recovery leaves the Euro inside its recent range
Scotiabank retained a neutral short-term outlook on Monday. Its strategists saw some encouragement in the intraday recovery, though they wanted to see how much of the gain the Euro could hold by the close.
“The EUR remains range bound between resilient support in the low 1.11s and firm resistance around 1.1275. Intraday gains look potentially bullish, the more so if sustained through the close of business, but short-term trend momentum is weak, leaning slightly bearish, which suggests more range trading is likely for now”
Recent prices show why the bank still gives $1.1275 weight. The Euro has traded as high as $1.1273 this month, within a fraction of a cent of that level. By Friday it was back at $1.1140. Monday’s rise recovered more than half of Friday’s decline but still left the pair below Thursday’s $1.1228 close.
A softer Dollar gives the Euro room to recover
Scotiabank’s account puts Monday’s move in the context of broader Dollar selling. Several major currencies advanced, with the Euro in the middle of the pack. The European data offered little reason for it to stand out.
“Germany reported a lower-than-forecast September trade surplus (EUR15.6bn). The Eurozone Sentix investor sentiment reading for November rose to a marginally stronger than forecast 2.4.”
The bank also drew attention to the choice of Christine Lagarde’s successor as European Central Bank president. Klaas Knot of the Netherlands and Spain’s Pablo Hernández de Cos are the two candidates under consideration. Scotiabank described de Cos as the consensus favourite but saw a stronger chance for Knot than that assessment suggests, given the likely backing of northern European governments.
“EU officials will consult over the coming weeks before EU leaders agree on their choice, likely in December.”
Scotiabank expects negotiations over other ECB appointments to influence that decision. Its near-term currency forecast rests on the trading range, with no change to its $1.1275 resistance level following the shortlist news.
What this means for EUR/USD
At $1.1193, the Euro was still about 0.8 US cents below Scotiabank’s resistance level. Holding Monday’s gains into the close would strengthen the bank’s reading of the rebound. A move through $1.1275 that held into subsequent trading would give buyers a stronger case that the October range was giving way.
On the downside, Friday’s $1.1140 close is the nearest recent reference. A return there would erase Monday’s recovery and put the focus back on the low $1.11s, where buyers have so far been willing to step in.
Our currency coverage draws on live market data, official economic releases and published bank research.
