EUR/USD: low end of range but moves should not be sustained - Scotiabank

Analysts at Scotiabank explained second-tier economic releases for the Eurozone were mixed (weaker German construction and retail PMI data, stronger Eurozone retail PMI data overall as French and Italian data strengthened) and had little impact on the EUR. 

Key Quotes:

"Short-term yield spreads remain onerous for the EUR relative to the USD, with the 2Y yield gap having widened back towards the extremes seen earlier in the year (near -225bps). 

Yield spreads had little impact on the EUR through Q2/Q3 as investors reallocated capital to Eurozone equity markets following the French presidential election but do appear to be having a somewhat more significant influence on spot again with the 2Y/spot spread nearing the peaks seen at the start of the year. 

EUR/USD short-term technicals: neutral/bearish.

Spot is trading heavily with the EUR capped in the upper 1.17s and edging back to the lower end of the range seen since the start of the week. Broadly, we still view the low 1,17 area (tested at the start of the week) as strong, medium-term support, however, and weak trend signals across a range of timeframes suggest that while the EUR looks soft, a sustained move lower is not on the cards at this point."