EUR/USD continues to hover near the upper end of its three-month trading range, with another attempt at the 1.18 handle possible today, according to Commerzbank FX strategist Michael Pfister. Despite last week’s upswing, implied volatility has since retreated, highlighting calmer market conditions.
Resistance at 1.18 still intact
Pfister noted that while EUR/USD has repeatedly approached 1.18 in recent months, the pair has struggled to sustain a breakout above this level. “It feels as though we’ve been confined to a relatively narrow trading range for the past three months. While the pair seems to be encountering resistance at 1.18, another attempt remains likely today,” he said.
Volatility dynamics
The strategist pointed out that implied volatility is currently trading close to the lower end of its recent range. This comes after a near-term spike two weeks ago, ahead of the US labor market report, failed to translate into sustained realized volatility. “The fact that volatility expectations did not materialize is one of the reasons why implied volatility has declined again in recent weeks. Context is everything,” Pfister added.
