Scotiabank strategists Shaun Osborne and Eric Theoret report that the Euro (EUR) continues to exhibit weakness against the US Dollar, driven by a sustained widening in front-end spreads and ongoing concerns within the European Union regarding the potential impact of a US diesel export ban. These concerns persist despite official US denials that a 90-day ban will be implemented, as stated yesterday [1].
From a technical perspective, the strategists describe the EUR/USD as being in a bearish trend, with losses in September appearing extended. They identify a support zone for the currency pair in the 1.1325/50 range, suggesting that the decline may be approaching a level where 'value' buyers could emerge. The current spot levels are nearing the lows observed through mid-year, which could provide firmer support [1].
On the economic front, Germany's IFO Survey showed improvement in September, with the Business Climate Index rising to 89.9 and Expectations increasing to 90.4. While IFO sentiment data has diverged from German GDP since 2024, the recent improvement in sentiment is seen as better aligning with firmer growth trends in the German economy [1].
Overall, the Euro remains under pressure, but technical indicators suggest the decline may be nearing exhaustion as it approaches a significant support area. Market participants are closely watching for potential stabilization or a reversal if value buyers step in at these levels [1].
CONCLUSION
The Euro's ongoing weakness is attributed to widening front-end spreads and EU concerns over a potential US diesel export ban, despite official denials. Technical analysis points to a possible support zone near 1.1325/50, which may attract buyers if the decline continues. Improved German sentiment data offers a modest counterbalance, but the overall market tone remains cautious.