EUR/USD: Intraday patterns retain a negative undertone - Scotiabank

Shaun Osborne, analyst at Scotiabank, said they remain bearish on EUR/USD and continue to view the EUR as somewhat overvalued relative to their rate spread model. He also noted intraday patterns retain a negative undertone.

Key quotes

Spot is little changed on the day. Eurozone data revealed a modest (though less than expected) “drop in Germany’s Gfk consumer confidence reading for August (10.0 versus 10.1 in July). Italian sentiment data for July were broadly firmer and relatively better than consensus. Ahead of the Fed, however, these data had little chance of influencing the markets.”

“We remain bearish on EURUSD and continue to view the EUR as somewhat overvalued relative to our rate spread model. Note Eurozone-US 2Y spreads have widened a little further to -137bps today, the biggest yield advantage for the USD since early June.”

“EURUSD short-term technicals: bearish—Intraday patterns retain a negative undertone, with the EUR well capped in the low 1.10 area so far on the day as the modest downtrend in place over the past two weeks remains intact. We see resistance at 1.1005/10.”

“We think weakness below 1.0965/70 near-term will put more pressure on support at 1.0915 (June 24 low). Trend studies are weak but aligning on the short, medium and longer-term charts. Technical signals suggest modest EUR gains to the mid 1.10 will attract selling interest.”