EUR/USD Outlook: Scotiabank Sees 1.1350-1.1400 Beyond Key Resistance

Scotiabank sees scope for the Euro to extend its recovery against the US Dollar, but a key resistance level still stands in the way of further gains.

The Euro to Dollar exchange rate was trading at $1.1231 on Wednesday, up 0.21%, after giving back part of its advance following the US midterm elections.

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The Euro had reached $1.1272 during the session, coming close to a level Scotiabank says must give way before a more substantial recovery can develop.

Its strategists see scope for EUR/USD to reach 1.1350-1.1400 if it clears 1.1275, a conditional technical objective rather than a forecast tied to a particular month.

The retreat from Wednesday’s high leaves that breakout unconfirmed.

A recovery with a specific hurdle

Scotiabank’s Shaun Osborne and Eric Theoret describe the short-term outlook as neutral to bullish:

“Positive price action overall this week so far plus the resilient EUR support in the low 1.11 zone in recent weeks maintain a broadly positive technical undertone for the EUR. But spot needs a clear push above 1.1275 to progress higher and take a run at 1.1350/1.14.”

The stronger price trend contrasts with the earlier Scotiabank assessment that weak momentum was holding back the Euro, when French bond-market tensions were preventing the currency from benefiting fully from a softer Dollar.

Scotiabank sees the election narrowing some of the advantages that have supported the Dollar:

“Ultimately, this USD reaction among the G10 currencies likely reflects something of a ‘relief rally’ as well as a shift in the USD toward the middle of its ‘smile’, in which relative growth and interest rate differentials narrow as the US/USD drift from the edge linked to exceptionalism-with the other edge of the smile tied to sentiment-driven risk aversion.”

In that framework, the Dollar loses support as US economic outperformance fades, without investors becoming fearful enough to seek safety in the currency.

Richard Lake, writing in Citi’s trading-desk commentary, is also cautious about extrapolating the initial response:

“The usd, modestly lower on the news suggests a slight shift in bias but given the lack of consensus about how to play these midterms before the event, choppy trading right after, is not that surprising.”

December ECB tightening remains in contention

Scotiabank reports that ECB policymaker Joachim Nagel saw a worsening inflation picture and considered further tightening likely in December.

Scotiabank adds:

“His colleague Sleijpen said the Iran shock was more persistent than had been thought-although there were no second-round inflation effects visible at this point-while Governor Kocher said a December rate hike was likely unless circumstances change.”

Second-round effects would involve the original energy shock feeding more persistently into other prices and wages.

The ECB’s latest decision left its deposit rate at 2.50%, acknowledging that expensive energy threatened both higher inflation and weaker growth.

The Governing Council also said underlying inflation had remained broadly stable and declined to commit to a future rate path.

The election has not settled US fiscal policy

Democratic control of Congress also leaves open several possible outcomes for US spending, rather than imposing an immediate brake on the economy.

On President Donald Trump’s response, Lake writes:

“At the moment, his acceptance of the results and promise to work with Democrats (albeit threatening the veto too) is noteworthy. There is a path to higher spending, something Trump and the broader movement have often advocated for, and that seems an obvious place to work together should they choose.”

That possibility complicates expectations that divided government will necessarily reduce inflation pressure and the Dollar’s interest-rate advantage.

For a longer-term comparison, Crédit Agricole puts EUR/USD at 1.13 in December 2026 and 1.17 in December 2027, allowing for a gradual recovery over the following year.

What This Means for EUR/USD

The immediate test is whether Euro buyers can turn a recovery within the recent range into a move above it. Holding above Scotiabank’s 1.1275 threshold would strengthen the case for an advance towards 1.1350-1.1400.

A continued failure there would leave the upper range boundary intact, despite the weaker Dollar. The low 1.11s remain the broader support area identified by Scotiabank.

Beyond the chart, the Euro needs favourable relative policy developments to sustain its gains. December ECB tightening remains possible, but so does US fiscal co-operation that keeps spending and inflation stronger than a simple gridlock argument would suggest.