The EUR/USD currency pair is trading slightly higher at the start of the week, with economists at Scotiabank predicting that the pair could test levels above 1.12 if it breaks past 1.11. Despite a muted start, the EUR should remain well-supported on minor dips in the short run, according to Scotiabank, and near-term momentum looks neutral but the broader bull tone in this market remains intact.
The EUR/USD pair has remained relatively stable over the past few weeks, with the euro showing signs of strength due to an improving economic outlook in the Eurozone. On the other hand, the US dollar has been weighed down by concerns over the impact of rising inflation and concerns over the pace of the US economic recovery.
Scotiabank economists note that the EUR/USD pair should continue to be supported on minor dips in the near term, and the broader bull tone in the market should remain intact. However, the pair could see a further rally if it manages to break past the key resistance level of 1.11.
Looking ahead, the key event this week for the EUR/USD pair is the European Central Bank’s (ECB) monetary policy meeting on Thursday. The ECB is expected to keep interest rates unchanged, but investors will be watching for any signals from the bank regarding the future of its bond-buying program and its outlook on the economic recovery in the Eurozone.
Scotiabank economists suggest that a push above 1.11 could see the EUR/USD rally extend to test 1.12+. However, if the pair fails to break past the resistance level of 1.11, it could be vulnerable to a downside correction.
In terms of support levels, Scotiabank economists suggest looking for support on dips to the 1.0975/1.1025 range in the near term. If the pair does break below these levels, the next level of support is seen at 1.0870.
In conclusion, Scotiabank economists remain optimistic on the outlook for the EUR/USD pair, expecting it to remain well-supported on minor dips in the short run. However, the key level to watch is 1.11, which could determine whether the pair sees a further rally or a downside correction. Investors will also be closely watching the ECB’s monetary policy meeting later in the week for any signals on the bank’s bond-buying program and economic outlook.
