Euro eyes key support at 1.1113 against US Dollar – Scotiabank

Weak French confidence figures and underperforming French bonds are weighing on the Euro (EUR) against a firmer US Dollar (USD), according to Scotiabank strategists Shaun Osborne and Eric Theoret. With EUR/USD below minor support, they flag 1.1113 as the key support level now exposed. Although the near-term technical outlook carries bearish risks, spot has fallen below their fair value estimate, prompting them to suggest that the Euro is beginning to look cheap.

Euro weakens on French risks but begins to look cheap

"However, French bonds are underperforming, nudging the spread over 10Y bunds back up to 161bps, and French Consumer Confidence plunged to 80 in October, equaling the low seen in 2022, reflecting recent political tensions and social unrest."

"Given the weak mood music around the EUR currently, those factors are enough to account for the EUR’s losses on the session, but spot is starting to deviate more significantly from our fair value estimate (1.1321), suggesting the EUR is starting to look “cheap”."

"Neutral/bearish – The EUR is technically softer this morning, with spot breaking below minor support at 1.1175, leaving key support defined by the mid-October low at 1.1113 exposed."

"Bearish pressure will intensify below here."

"After steady selling interest and the firm resistance that has developed around 1.1275 over the past month, a clear push through the low 1.11 area risks triggering a double top pattern on the short-term chart, driving the EUR back to the mid-1.09s."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)