EUR/USD Bullish Trend: Scotiabank’s Compelling 1.20 Breakout Forecast for 2025

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EUR/USD Bullish Trend: Scotiabank’s Compelling 1.20 Breakout Forecast for 2025

LONDON, March 2025 – Scotiabank’s latest technical analysis presents a compelling case for the EUR/USD currency pair, identifying a sustained bullish trend that now eyes a critical breakout above the 1.20 psychological level. This forecast, derived from meticulous chart examination, arrives amid a complex global economic landscape marked by shifting central bank policies and evolving trade dynamics. Consequently, market participants are closely monitoring this key technical threshold for directional signals in the world’s most liquid forex pair.

Scotiabank’s EUR/USD Bullish Trend Analysis

Scotiabank’s foreign exchange strategists have published a detailed technical assessment of the Euro against the US Dollar. Their analysis hinges on several converging chart patterns and momentum indicators. Firstly, a series of higher highs and higher lows has firmly established an uptrend on the weekly timeframe. Secondly, the pair has consistently found support above its 100 and 200-day moving averages, a classic sign of underlying strength. Moreover, key oscillators like the Relative Strength Index (RSI) have maintained bullish configurations without entering overbought territory for extended periods.

The bank highlights the 1.20 level as a major technical and psychological barrier. Historically, this zone has acted as a pivotal battleground between bulls and bears. A decisive weekly close above 1.20, supported by strong volume, would confirm the breakout. Such a move could then open the path toward resistance levels near 1.2150 and 1.2350, according to the bank’s measured move projections. This analysis is not conducted in isolation; it references years of price action data and aligns with established technical analysis principles.

Economic Drivers Behind the Euro’s Strength

Technical patterns do not exist in a vacuum. They often reflect fundamental economic currents. The Euro’s resilience finds support in several macroeconomic factors. The European Central Bank has maintained a cautiously optimistic stance on inflation and growth, signaling a gradual normalization of policy. Simultaneously, relative economic performance within the Eurozone has shown improvement, particularly in core nations like Germany and France.

Conversely, the US Dollar has faced headwinds from market expectations regarding the Federal Reserve’s interest rate cycle. While the Fed remains data-dependent, futures markets have priced in a different trajectory for US rates compared to earlier, more hawkish forecasts. This divergence in central bank policy expectations creates a favorable environment for EUR/USD appreciation. Trade flow data and capital movement trends also provide context for the pair’s momentum, as investors reallocate assets based on yield differentials and growth outlooks.

Chart Patterns and Technical Evidence

Scotiabank’s report delves into specific chart formations that bolster the bullish thesis. A prominent ascending triangle pattern has been developing on the daily chart, with a flat resistance line near 1.1980 and a rising trendline support. This pattern typically resolves in the direction of the prior trend, which is upward. Additionally, the Moving Average Convergence Divergence (MACD) indicator remains in positive territory, with its signal line providing periodic buy signals on pullbacks.

The following table summarizes key technical levels identified in the analysis:

Volume analysis further supports the trend. Notably, up days have frequently occurred on higher volume than down days, indicating institutional accumulation. This on-balance volume (OBV) trend confirms that the price movement is backed by genuine buying interest, not merely short covering or speculative flows.

Market Impact and Trader Sentiment

The pursuit of the 1.20 breakout has significant implications for various market segments. For multinational corporations, a stronger Euro impacts earnings conversions for European exporters but benefits US companies with significant EU revenue. Forex traders are adjusting their risk exposure, with options markets showing increased demand for calls above 1.20. Commodity markets, particularly those priced in USD like crude oil and gold, also feel indirect effects from major currency pair movements.

Commitment of Traders (COT) reports from exchanges reveal a gradual shift in positioning. While leveraged funds had held net short positions on the Euro for much of the previous year, recent data shows a steady reduction in these bearish bets. Asset managers, meanwhile, have been incrementally adding to long EUR/USD positions, aligning with a more constructive medium-term view. This shift in sentiment, when combined with the technical setup, creates a potent backdrop for a potential trend continuation.

Historical Context and Risk Considerations

It is crucial to place the current analysis within a historical framework. The EUR/USD pair has tested the 1.20 region multiple times over the past decade, with breaks above it often proving volatile. Therefore, Scotiabank’s analysts emphasize that a breakout requires confirmation. A false breakout, where price spikes above 1.20 only to reverse sharply, remains a tangible risk. Such an event could trigger stop-loss orders and lead to a swift corrective move back toward 1.1750 or lower.

Primary risks to the bullish forecast include:

• Geopolitical Escalation: Renewed tensions affecting European energy security.
• U.S. Economic Resilience: Stronger-than-expected US data reviving Fed hawkishness.
• Eurozone Fragmentation: Political instability or widening sovereign debt spreads.
• Market Liquidity Shocks: Unforeseen financial stress altering risk appetite.

Prudent risk management, therefore, dictates that traders await a confirmed weekly close above 1.2020 with conviction before considering the breakout valid. This disciplined approach separates reactionary trading from strategic position-building based on verified technical signals.

Conclusion

Scotiabank’s analysis presents a well-reasoned, evidence-based case for a continued EUR/USD bullish trend targeting a decisive breakout above the 1.20 level. The forecast synthesizes clear technical patterns, supportive macroeconomic divergences, and shifting market sentiment. However, the path is not without obstacles, and the 1.20 zone will likely serve as a critical test of conviction for both bulls and bears. For traders and investors, the coming weeks will be pivotal, offering either a confirmation of strength that opens new upside targets or a rejection that reinforces the level’s historical significance. Ultimately, the pair’s behavior at this juncture will provide valuable insights into the broader direction of global capital flows and relative economic strength for 2025.

FAQs

Q1: What is the main technical pattern Scotiabank identifies for EUR/USD?
Scotiabank’s analysis highlights an ascending triangle formation on the daily chart, coupled with a series of higher highs and higher lows on the weekly chart, which collectively signal a sustained bullish trend for the currency pair.

Q2: Why is the 1.20 level so significant for EUR/USD?
The 1.20 level is a major psychological and technical barrier. It has acted as key resistance and support numerous times over the past decade. A confirmed breakout above it is viewed as a strong bullish signal that could trigger further sustained appreciation.

Q3: What fundamental factors support a stronger Euro against the Dollar?
Key factors include the market’s perception of a narrowing policy divergence between the ECB and the Fed, improving relative economic data in the Eurozone, and flows related to trade balances and capital movements.

Q4: What would invalidate Scotiabank’s bullish forecast?
A weekly close back below the key support zone around 1.1850, especially if driven by a fundamental shock like a hawkish Fed pivot or a severe Eurozone political crisis, would significantly undermine the bullish technical structure.

Q5: How should a trader approach a potential breakout above 1.20?
Traders should seek confirmation through a strong weekly candle closing decisively above 1.2020, ideally accompanied by high trading volume. Position sizing should account for the potential of a false breakout, using stop-loss orders below recent swing lows to manage risk.

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