Euro to Dollar Forecast: Limited Resistance Before 1.1700, say Scotiabank

EUR/USD: modestly bullish bias, but highly event-dependent

Scotiabank’s assessment improves the near-term EUR/USD risk-reward because the pair is trading below its estimated two-year yield-spread fair value near 1.1650, while the bank identifies relatively limited resistance around 1.1680–1.1700 and support near 1.1580. The mechanism is a narrowing relative-yield disadvantage for the euro, which can encourage dollar-funded positions to be reduced and improve demand for EUR.

The key catalyst is the ECB decision on Thursday, September 10, 2026. A 25-basis-point increase appears broadly anticipated, so the hike itself may have limited incremental impact. The larger market reaction should come from the forward guidance—particularly whether the ECB signals further tightening in response to energy-related inflation risks. A hawkish message could push EUR/USD through the 1.1680–1.1700 area and reinforce expectations of a move toward the higher 1.18–1.20 region. A hike accompanied by cautious guidance would create a classic “buy the rumor, sell the fact” risk, especially with part of the policy premium already reflected in the exchange rate.

Options positioning is also somewhat more supportive: Scotiabank reports that EUR risk reversals have risen, indicating reduced demand for downside protection. That can amplify an upside move if the ECB surprises hawkishly, but it also means the market may be less protected against a sharp post-decision reversal.

Market implications:

• EUR/USD: Neutral-to-bullish before the ECB, with 1.1680–1.1700 the immediate test. A sustained break would improve the medium-term bullish structure; rejection would keep the pair range-bound.
• USD: Vulnerable if US–German front-end yield spreads continue narrowing, but could recover quickly if ECB guidance disappoints or US yields rise.
• EUR crosses: A hawkish ECB would likely support the euro more broadly, although the response against sterling and the yen would depend on their own central-bank expectations.
• Risk sentiment: The move is primarily a rates and policy trade rather than a broad risk-on signal. Its durability depends on real yield differentials, energy prices, and whether European growth can absorb tighter policy.

The main invalidation risks are an ECB hike paired with dovish forward guidance, a renewed widening in US–German yields, or evidence that energy-driven inflation is weakening rather than requiring further policy restraint. Traders should monitor the ECB’s projections and wording, two-year German–US yield spreads, EUR options risk reversals, and whether EUR/USD can hold gains above the stated resistance zone rather than merely testing it.