EUR/USD short-term technicals remain bearish – Scotiabank

FX Strategists at Scotiabank stay bearish on the pair in the near term, adding that there is room for a test of 1.2130/35.

Key Quotes

“The EUR’s solid run of weekly gains has clearly ended this week, with EURUSD heading for a decent pullback on the week (-1.75%). French and Italian IP data reflected stronger than expected output for Dec but fundamental data count for little at the moment, with price action largely defined by positioning. EUR sentiment has soured quite significantly in the short run, with 1m riskreversals reflecting the strongest demand for EUR downside protection since May. We think recent gains may unwind a little further but EUR fundamentals – strong/strengthening growth, declining political risks – remain attractive from a longer run perspective”.

“EURUSD’s loss of support around 1.2335 suggests downside risks remain for spot in the near-term, with the low 1.23 area defining the neckline of a minor double top on the short-term chart (two failed tests of 1.2535/45). We think EURUSD is liable to trade back to the 1.2130/35 area (measured move objective) over the next week or so. 1.2335/45 is resistance”.