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According to FX Strategists at Scotiabank, the pair could attempt a test of the 1.1780 area in the near term.

Key Quotes

“ECB rate expectations are firming and yield spreads are narrowing in a EUR-supportive manner as market participants assess the implications of a fresh 5 year high in the euro area’s headline CPI (reaching 2.1% y/y). Other fundamental releases were mixed with stronger than expected German retail sales, and slight disappointment from Spanish, Italian and euro area GDP. Risk reversals are narrowing and suggest a considerable easing in the premium for protection against EUR weakness, vs. both the USD and JPY”.

EUR is extending its recent recovery and pushing to the mid-1.17s with a break of trend resistance drawn from the recent highs. Bullish momentum is increasing modestly and the directional indicators have crossed to confirm a shift in the balance of risk. EUR appears set to resolve its recent triangular consolidation in a bullish manner and we look to an extension toward 1.1780 and the early July high just under 1.18. Near-term support is expected at the 50 day MA (1.1677)”.