EUR/USD  weakness ahead, with risk toward 1.10 - Scotiabank

Eric Theoret, analyst at Scotiabank, noted that fundamentals and technicals remain bearish for EUR/USD, with  risk toward the late July lows around 1.10.

Key Quotes

“EUR is soft, in an environment of broad-based USD strength as market participants consider Fedspeak and a theme of renewed confidence among Fed policymakers heading into Friday’s Jackson Hole speech from Chair Yellen.”

“Fundamentals will remain in focus ahead of the event, as market participants look to Tuesday’s flash PMI’s for Germany, France and the eurozone. Yield spreads are responding to the shift in the outlook for relative central bank policy, the 2Y Germany-U.S. spread widening toward -140bpts at levels last seen in early June.”

“We look to EUR weakness throughout the week, with risk toward the late July lows around 1.10.”

“EURUSD short-term technicals: bearish—EUR is retreating from last Thursday’s highs just below 1.14 following a failed attempt at a full retracement of its Brexit-driven decline. Bullish momentum signals are moderating and DMI’s hint to a shift in the balance of risk. Short-term charts have delivered a decisively bearish signal following the completion of an evening star on the two hour candles. We look to further downside toward the 9 day MA (1.1245) and the 21 day MA (1.1164).”