EUR/USD poised for further pullbacks – Scotiabank

FX Strategist at Scotiabank Eric Theoret reiterated the bearish view for EUR/USD in the short term.

Key Quotes

“Relative policy appears set to provide for EUR weakness as we consider the post-Brexit stabilization in Fed expectations (flat for 2016, 9bpts by 2017, 23 bpts by 2018) and the potential for a renewed tightening in the pricing of the Fed profile”.

“ECB policy is set to remain accommodative and the risk is biased to potentially greater stimulus. In terms of sentiment, risk reversals appear to be consolidating their post-Brexit fade in the premium for protection against downside risk. Renewed banking sector concerns are likely to prove a weight for EUR and sentiment in the near-to-medium term”.

“Both momentum signals are bearish and finding confirmation from the DMI’s. The ADX suggests a strengthening bearish trend. EUR has consolidated around its 200 day MA ahead of what is expected to be renewed decline toward 1.08, 1.07, and the December low near 1.05”.