Foreign exchange analysts at ING expect EUR/USD to edge below 1.1500 as the Dollar regains ground, although Scotiabank sees the Euro holding within a 1.1500–1.1600 range.

The Euro-to-Dollar exchange rate has climbed back towards 1.1550, but fx analysts at ING think the latest recovery may be running a little ahead of the rate backdrop.

EUR/USD traded around 1.1547 on Wednesday, up from 1.1507 at the start of the week and more than 1.5% above its late-July low.

ING’s short-term fair-value model suggests the pair is now “modestly overvalued”, by around 0.5% to 1%.

“It’s not a very strong directional signal,” the bank said, “but does endorse our perception that EUR/USD needs help from a favourable shift in short-term rate differentials… to take another leap higher.”

That help would probably need to come from weaker US labour data and renewed speculation that the Federal Reserve could adopt a less hawkish stance.

ING believes the Dollar is now more evenly positioned after last week’s sell-off and sees “room for some USD recovery in the next couple of days”.

“If position-squaring exacerbated the dollar selloff last week, we think further USD losses from here require a more compelling macro argument,” it said.

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EUR/USD has recovered steadily over the past 48 hours, but resistance has emerged around the 1.1550 area.

The bank expects attention to remain firmly on US employment releases. Unless ADP and payrolls point to a clearly weakening jobs market, ING doubts the Dollar will surrender much more ground.

“Our baseline for this week is for EUR/USD to edge back below 1.150 on a more supported USD,” it said.

Even so, ING is not looking for a full reversal of the Euro’s recent gains.

“Unless US jobs figures come in particularly hot, we don’t see a return to 1.140 in the near term.”

Near-Term EUR/USD Outlook: Scotiabank Sees a 1.1500–1.1600 Range

Scotiabank takes a slightly more constructive view of the Euro’s latest rebound.

The bank said EUR/USD was “extending its latest consolidation in the mid/lower 1.15 area”, with the final Eurozone services and composite PMIs offering “a fractional improvement on the preliminary prints”.

From a valuation perspective, Scotiabank sees little obvious imbalance.

“The EUR is trading in line with a narrow FV estimate tied to 2Y spreads between the US and Germany, offering little in terms of directional risk from a fundamental perspective,” it said.

The technical picture has improved, however.

“The EUR’s latest recovery has been important, delivering a clear bullish shift in momentum and a break of trend resistance with the push above the 50-day MA,” Scotiabank said.

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EUR/USD has moved back above its 20-day and 50-day moving averages after recovering from June’s low near 1.1330.

Scotiabank identifies near-term resistance around 1.1550, followed by the 200-day moving average near 1.1630, and expects the pair to trade between 1.1500 and 1.1600.

That leaves a fairly narrow battleground. ING sees a modest dip below 1.1500 if US data hold up, while Scotiabank thinks the improving trend should limit the downside unless the Dollar receives a much stronger macro boost.

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