Scotiabank strategists Shaun Osborne and Eric Theoret report that the EUR/USD pair is trading in the mid-1.15s, posting a 0.2% gain versus the US Dollar as the Euro benefits from supportive euro area GDP data and a return to trade surplus in June, which ended a brief deficit from March to May [1]. The second euro area Q2 GDP release matched expectations, registering 0.4% quarter-on-quarter growth and a 1.0% year-on-year pace [1]. Yield spreads between Germany and the US are recovering, with the 2-year spread reaching levels last seen in mid-May and Scotiabank's narrow fair value estimate for EUR/USD rising to 1.1641, above the current spot rate [1].
Short-term technicals are described as bullish, with the RSI back above 60, indicating renewed momentum for the Euro [1]. The EUR/USD pair has found support near 1.1500 and faces resistance around 1.1580 and the 200-day moving average at 1.1630, while broader support is seen at the 50-day moving average of 1.1466 [1].
Scotiabank notes that the options market is reducing its premium for protection against EUR weakness, and bearish CFTC data suggest vulnerability to further gains given the improvement in yield spreads [1]. The strategists see scope for additional sentiment and positioning-related gains for the Euro in the near term [1].
CONCLUSION
The Euro's modest gains against the US Dollar are underpinned by solid euro area GDP data, a return to trade surplus, and recovering yield spreads. Technical and fundamental factors suggest further upside potential for EUR/USD, with analysts highlighting scope for additional gains if current trends persist.