EUR/USD seen re-testing 1.20 near term – Scotiabank

In view of FX Strategists at Scotiabank, the pair stays neutral/bullish near term and could attempt a test of 1.20.

Key Quotes

“EURUSD is trading a little off the overnight high near 1.1820. European focus will fall principally on the ECB policy meeting Thursday amid speculation that the central bank may make a first, cautious step towards at least discussing tapering asset purchases. The EUR’s recent descent from the 1.24 area perhaps allows policy makers a little wider margin of manoeuver in their policy discussions amid signs of a sharper than expected pick-up in inflation in the most recent data. The process will be carefully managed and President Draghi will likely try to contain market reaction to any decision towards tapering that is made but we think the process will be EUR-supportive”.

“EURUSD price action may be settling into a new, slightly higher range between modest support in the low/mid 1.17s and resistance at 1.1820/50. Longer-term price signals are unequivocally positive for the EUR, with the market carving out a bullish reversal (weekly morning star signal) from the early Jun test under 1.16. We think the near-to-medium term risk for the EUR is tilting towards a retest of 1.20”.