EUR extending post-ECB gains – Scotiabank

The Euro (EUR) is a mid-performer among the G10, building on last week’s gains (against US Dollar (USD)) catalyzed by the decidedly neutral ECB meeting, Scotiabank’s Chief FX Strategists Shaun Osborne and Eric Theoret report.

Spreads offer support and markets shrug off Fitch France rating cut

“The outlook for relative central bank policy remains a core component of our bullish EUR view, and is likely to be underscored by this week’s expectedly dovish Fed. EZ-US yield spreads are steady at their recent highs, and the euro area bond market remains quiescent despite Fitch’s cut to France’s credit rating (A+ from AA-) on Friday.”

“France’s 10Y yield continues to trade in tandem with Italy’s. In terms of data, the euro area trade balance (for July) came in lower than expected, and the highlight of this week will be Tuesday’s ZEW investor sentiment. The ECB speaking calendar is heavy, with President Lagarde scheduled to speak on both Monday and Tuesday.”

“We are bullish following last week’s break of descending resistance. The renewed bullishness has us looking to a break of Tuesday’s high in the upper 1.17s, targeting 1.18 followed by a possible push to fresh multi-year highs. The RSI is confirming the shift in momentum, recovering from neutral levels with a climb to decidedly bullish levels nearing 60.”