Scotiabank's analysts have a bullish outlook on the EUR/USD pair, predicting a potential breakout above 1.20. While the Euro is modestly stronger against the Dollar, it lags behind other G10 currencies. However, sentiment and options pricing suggest a bullish trend, with supportive factors such as Germany-US yield spreads and a bullish technical backdrop. The near-term trading range is seen as 1.1850–1.1950, with limited resistance before the psychologically important 1.20 level and further resistance around 1.2080. This positive outlook is supported by the outlook for relative central bank policy, with 2Y Germany-US yield spreads threatening a break of multi-year highs from December. The Euro is also supported by yields and options, with sentiment dominating in the absence of high-level data releases. However, the risk reversals are creeping back toward their late January high, indicating a potential for downside protection. The short-term technicals are bullish, with momentum and an RSI hovering just below 60. This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.
