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EUR/USD outlook remains neutral/negative – Scotiabank Pablo Piovano

Shaun Osborne, Chief FX Strategist at Scotiabank, sees EUR/USD’s outlook at neutral/negative in the near-term.Key Quotes“Month-end rebalancing flows may provide the EUR with some support today and investors may take some comfort from the very gradual improvement in Eurozone inflation (slightly higher than expected headline and core readings for June at 0.1% y/y and 0.9% y/ y respectively)”.“We point out here, however, that the EUR appears to be less sensitive to interest rates (and presumably therefore fundamental inputs) and increasingly sensitive to local bank stocks while both spreads and relative bank stock returns suggest the EUR is overvalued. We see limited upside for EURUSD from current levels”.“Spot is grinding higher and while the market has established a foothold above 1.11, we still tend to think price action is consolidating, rather than staging a recovery. Short-term charts suggest upside potential, within the current consolidation phase, to 1.1180”.“However, we note very strong resistance at 1.1150 (base of the 6-month channel that the market broke below last week) which should figure as important barrier to EUR gains on a daily close basis



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