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In opinion of FX Strategists at Scotiabank, the pair remains fragile and needs to quickly regain the 1.1500 area in order to prevent further weakening.

Key Quotes

“The EUR retains a weak undertone but losses appear to be steadying somewhat in the upper 1.13 area so far. There have been no major data releases in the Eurozone today and markets have been rather focussed on the Turkish situation as a driver of the currency. Italian government officials told a local newspaper that the country was not exposed to speculative attack amid concern that investors are pressuring Italian bond yields back to near May’s high (and widening spreads with bunds). While investors are mainly focused on TRY contagion at present, domestic fiscal policy issues concerns do perhaps underlie some of the recent weakening in BTPs. A Forza Italia official told the press today that breaking the EU’s 3% deficit/GDP rule was not “taboo”.

“Spot has steadied in the upper 1.13/lower1.14 range so far on the session. Price signals are showing some signs of trying to stabilize but the market has a long way before it can really be said to be improving. We see support at 1.1365 this morning and minor resistance at 1.1410/15. Spot will need to regain the 1.15 area quickly to avoid the risk of additional – and more significant – medium term, technically-driven weakness from here, we feel”.