- EUR/USD appreciates for the second consecutive day to return towards 1.1835.
- US dollar loses ground on concerns about surging COVID-19 infections.
- EUR/USD seen at 1.1700 in three months – Rabobank.
The euro is going through a mild recovery against the US dollar on Friday, extending its recovery from 1.1745 lows earlier this week to 1.1835. The common currency has managed to regain lost ground favoured by a weaker US dollar.
Euro picks up on US dollar weakness
The US dollar has remained on the back foot on Friday, retreating against safe-havens like the yen and the Swiss franc, with the market increasingly wary about the increasing COVID-19 cases in the US and Europe. Concerns about the economic impact of the pandemic have replaced the enthusiasm about the progress in the vaccine as the market comes to terms with the fact that no cure will be available to avoid a dramatic escalation of cases this winter.
Against this backdrop, US Treasury yields have continued pulling back from the post-pandemic highs reached on Wednesday. The yield for benchmark 10-year note has dropped to 0.88% from 0.97%, which has increased downside pressure on the US dollar.
EUR/USD seen at 1.1700 in three months – Rabobank
The FX analysis team at Rabobank see the euro’s upside potential limited over the mid-term: “On September 1 comments from ECB Chief economist made it clear that he was concerned about the summer’s rise in the value of the EUR and the rally in EUR/USD stopped short at 1.20. We still see this area as marking strong psychological resistance for EUR/USD and would expect the currency pair to trade mostly in the 1.20 to 1.16 range in the months ahead. We have revised up our 3-month EUR/USD forecast to 1.17 from 1.16 and our 6-month forecast to 1.18 from 1.14.”
Credit: FX Street