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.

U.S. Dollar Index gains some ground as traders focus on the Initial Jobless Claims report. The report indicated that 189,000 Americans filed for unemployment benefits in a week, compared to analyst forecast of 196,000.

Traders also reacted to the huge sell-off in U.S. equity markets. Demand for safe-haven assets increased, which was bullish for the American currency.

Japanese Yen Recovery Remains Elusive as MUFG Analysts Retain USD/JPY 149 Forecast

MUFG sees the Japanese Yen nearing a turning point against the US Dollar, but persistent overseas investment is limiting the benefit of lower US yields.

The US Dollar to Yen exchange rate was trading around 158.19 on Wednesday, below its opening level but well above an earlier low of 157.43, as another recovery in the Japanese currency struggled to hold.

MUFG still expects the Yen to strengthen, retaining a USD/JPY forecast of 149 for September 2027 in its latest monthly projections.

Derek Halpenny, MUFG’s head of research for global markets EMEA and international securities, identifies a striking divergence:

“The 2-year UST bond yield is now down 35bps from the intra-day high set on 29th September. Over the same period, USD/JPY is one big figure higher.”

That means the Dollar has gained roughly one Yen over that period, even as the return on short-dated US government debt has fallen.

Halpenny adds:

“Intervention in last July / early August has distorted the link with rates but what the movement of the yen does indicate is that there are still some structural flows that continue to weigh on yen performance and those flows could well be slow to change.”

Japanese savings keep finding a home abroad

The continuing attraction of overseas equities helps explain why a narrower interest-rate gap has not been enough.

Japan’s expanded NISA tax-exempt investment scheme gives households greater scope to invest.

NISA does not require investors to buy foreign assets, but MUFG sees the expansion contributing to demand for overseas markets, particularly the US.

Its latest discussion draws on September figures showing almost ¥4 trillion of foreign-equity purchases over three months, evidence of the persistent overseas buying already testing earlier Yen recovery forecasts.

Halpenny expects that pressure to continue:

“This expanded NISA limit will likely mean this scale of outflow persists given the erosion of savings held in deposit savings due to higher inflation and given strong equity market returns, in particular in the US. 47% of household wealth in Japan is in cash deposits.”

Companies have a separate reason to invest abroad: Japan’s shrinking population limits opportunities in their home market.

Halpenny writes:

“FDI outflows as businesses look to expand in growing markets abroad continues to act as a bigger drag on the yen. The 12mth sum of net FDI outflows has been running between JPY 24trn and JPY 28trn per year (USD 155bn to USD 180bn) for the last three years.”

These decisions concern where businesses expand, rather than simply which country offers the highest short-term interest rate, making them less responsive to a modest change in bond yields.

MUFG still expects domestic policy to help

The bank nevertheless sees grounds for a gradual recovery as Japan’s monetary policy becomes more restrictive and domestic assets become more attractive.

The Bank of Japan held its policy rate at 1.25% on 30 October, with one of its nine policymakers preferring an increase to 1.50%.

MUFG expects a December increase followed by two more in 2027, taking the policy rate to 2.00%.

But its currency outlook makes clear that the anticipated reallocation of Japanese savings has yet to appear:

“Capital flows do not yet indicate any notable shift in preference to domestic assets by Japanese investors but that could gradually become evident going forward.”

That lag also featured in ING’s case for an earlier BoJ hike without an immediate, lasting Yen recovery.

MUFG’s monthly outlook also identifies a sharper market sell-off as a potential catalyst:

“If there was a bigger risk-off period that saw front-end yields drop more notably it would likely coincide with yen outperformance.”

October’s market turbulence was insufficient, in Halpenny’s assessment, but a bigger retreat from risk could restore more of the Yen’s appeal as a haven.

“We still suspect the yen is close to a turning point and market rates and/or policies by the government to encourage greater sums of capital to remain in Japan should have a positive impact on the yen.”

What This Means for USD/JPY

Wednesday’s retreat in USD/JPY offers some support for the Yen, but the reversal from the session low shows how difficult it remains to sustain gains. Lower US yields alone have not displaced the demand for foreign assets described by MUFG.

The bank’s retained 149 projection requires a more lasting change over the coming year. Further BoJ tightening could improve the return available in Japan, although the evidence still needs to show investors choosing to keep more money at home.

A deeper equity-market correction could accelerate the Yen’s recovery if it changes investors’ willingness to hold overseas risk. Without that shift, continuing household purchases and corporate expansion abroad could keep absorbing the benefit of a narrower yield gap.

The pair succumbed to positive pressure during yesterday’s trading, surging toward 178.45 before returning to fluctuate near the resistance level at 178.10 to gather additional positive momentum.

We emphasize the importance of waiting for confirmation of a breakout above current resistance, which would pave the way for further gains toward 178.70 and 179.25, respectively. However, a renewed bearish move would require the price to first decline toward 176.40, followed by an attempt to reach the support level at 174.95.

The expected trading range for today is between 177.00 and 178.70

Trend forecast: Bullish

Created on November 05, 2026

The U.S. dollar fell initially on Wednesday, perhaps in reaction to the elections. However, we have since seen the pair rally, as it aims for a resistance barrier. Ultimately, I am still bullish on the carry trade.

USD/JPY

The U.S. dollar initially did fall during the trading session in reaction, I suspect, to the election result, but has turned around to show signs of life. By doing so, this is a market that continues to see a massive amount of carry trading willing to jump in and take advantage of that ability to get paid at the end of every session.

At this point, it’s worth watching the 159 yen level

At this point, it’s worth watching the 159 yen level as a region that, if we can break above, then we could really take off to the upside. Short-term pullbacks, I think, open up the possibility of buying opportunities, and I do remain bullish on this pair as the Federal Reserve probably has to continue to look to the idea of raising rates in December, while the Japanese may, but even if they do, the interest rate differential is still pretty wide.

We get the jobs number on Friday. That will be a major factor to analyze in this pair as well. If we can break that 159 yen level, the 160 yen level would be the next target. Anything above there could open up a much bigger move, perhaps to the 164 yen level.

If we fall from here, I look at that as a buying opportunity, but if we were to break down below the 156.50 yen level, then I’d have to reassess things. As things stand right now, short-term dips continue to be buying opportunities. This is a market that I will not be looking to short anytime soon, as the markets offer pairs that won’t cost me to short dollars, assuming that I would want to.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

Christopher Lewis is a technical analyst and market commentator at DailyForex with more than two decades of trading experience in Forex and other leveraged markets. Based in Columbus, Ohio, he specializes in chart-based analysis of major currency pairs, stock indices, commodities, and energy markets, focusing on clear support and resistance levels, trend structure, and risk management. Christopher produces daily written and video analysis for traders who rely on technical setups to navigate volatile market conditions

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