Scotiabank strategists Shaun Osborne and Eric Theoret report that the EUR/USD currency pair has slipped to the upper 1.15s, marking a fresh two-week low, as market sentiment turns bearish despite supportive yield spreads [1]. The strategists attribute the renewed deterioration in the euro to rising oil prices, which have sparked concerns about the euro area's terms of trade given its status as a major energy importer [1].
The EUR is described as 'soft,' down 0.2% versus the USD, with spot drifting below Scotiabank's narrow fair value estimate of 1.1619 [1]. Measures of EUR sentiment have shifted bearishly over the past week, ending a brief period of bullish-leaning risk reversals seen in mid to late August [1]. The strategists note that the support from higher yield spreads is being outweighed by the negative turn in sentiment, leading to a focus on lower technical support levels [1].
From a technical perspective, the RSI has just broken below the neutral threshold into bearish territory, and attention is now on near-term support at 1.1520, with additional support seen near the 50-day moving average at 1.1499 [1]. Resistance is expected in the 1.16 to 1.1620 range, while the medium-term range from mid-2025 remains flat with wide congestion centered around the mid-1.16s [1].
The domestic economic calendar is described as quiet, causing market participants to focus on broader themes such as energy prices and terms of trade rather than local data releases [1].
CONCLUSION
The euro is facing renewed downside pressure against the US dollar, driven by rising oil prices and a shift to bearish sentiment, despite supportive yield spreads. Technical analysis points to further potential declines, with key support levels in focus. Market participants are likely to remain attentive to energy price developments and broader macroeconomic themes.