Consolidating below 1.12 for a break higher – Scotiabank

EUR/USD is consolidating just below 1.12, Friday’s high and EURUSD’s highest since July 2023, which was briefly retested in overnight trade, notes Shaun Osborne, chief FX strategist at Scotiabank.

Bulls can try to test 1.12

“Note that EZ/US 2Y spreads are also the narrowest since mid-2023, providing key support for the EUR. Germany’s IFO business confidence fell to 86.6 this month, down from July but slightly better than forecast. The details reflected weakness in most sectors of the economy outside services. The index is weak and retreating, but remains well above recession levels.”

“Short-term trading patterns suggest that the EUR could be peaking in overnight trade after forming a bearish ‘evening star’ pattern on the 6-hour charts. Minor losses in quiet European trade tend to confirm this development. But losses are likely to remain contained at least in the short term.”

“Trend dynamics remain bullish on the DMI oscillators in the short, medium and long term and this should limit losses in the euro to 1.11s. Key short-term support is 1.1100/10.”