EUR/USD remains near the upper end of its three-month trading range, with another test of 1.18 possible today. Despite a recent spike, implied volatility has retreated, underscoring calmer market conditions, Commerzbank's FX analyst Michael Pfister notes.

EUR/USD seems to be struggling to break above 1.18

"Last week, I discussed the possible factors that could push EUR/USD back above 1.18 in detail here. However, the fact that it feels like we have been trading within a fairly narrow range for the last three months must also be put into perspective. While it is true that EUR/USD seems to be struggling to break through the 1.18 level on a sustained basis, we could still make another attempt today."

"Nevertheless, the exchange rate is currently trading close to the upper end of the last three months' trading range (the high was at the beginning of July). It is also true that implied volatility is trading close to the lower end of this range, but it should be noted that it almost reached its high two weeks ago, shortly before the US labour market report."

"The fact that this volatility did not materialise in the end is likely one of the reasons why it has fallen again in recent weeks. So context is everything."