Euro: Key support at 1.1113 in focus against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight Euro (EUR) weakness versus the stronger US Dollar (USD), driven by French bond underperformance and poor confidence data. They note EUR/USD is trading below minor support, with key support at 1.1113 now exposed. Spot has moved below their fair value estimate, leading them to suggest the Euro is starting to look cheap despite near-term bearish technical risks.

French risks weigh but Euro looks 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."