The Euro (EUR) is quietly consolidating just above 1.14 against US Dollar (USD), trading in an exceptionally tight range for a second consecutive session, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

This week’s decline has been dramatic

"The euro area preliminary CPI for the month of July has offered a modest upside surprise, printing flat (vs. -0.1% exp) on a m/m basis and remaining unchanged at 2.0% y/y (vs. expectations of a marginal decline to 1.9%). Core was as expected and unchanged, at 2.3% y/y."

"The outlook for relative central bank policy remains a fundamental source of support for the EUR, as seen in the recovery of deeply negative German-U.S. yield spreads since late May. This week’s pullback looks to have been driven by sentiment and positioning, rather than fundamentals, and we look to renewed medium-term EUR gains."

"This week’s decline has been dramatic, sending the RSI to deeply oversold levels around 30. The multi-month trend remains bullish however, as we’ve observed notable support just above 1.14. We look to a near-term range bound between 1.1380 and 1.1480."