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EUR/USD Exchange Rate Struggling for Now but Could Climb Higher on US Dollar Weakness

EUR/USD Exchange Rate Slips from Weekly Highs as Euro Struggles for Ground 

Broad weakness in the US Dollar (USD) has helped the Euro to US Dollar (EUR/USD) exchange rate to climb higher this week. However, uncertainty in the Eurozone outlook is making it difficult for the pair to sustain gains. 

EUR/USD has seen broad volatility lately as the Euro (EUR) is vulnerable to rival strength. EUR/USD dipped as low as 1.20 last week but ultimately closed the week near where it started, in the region of 1.2118. 

This week has been slightly the opposite situation. EUR/USD has been trending with an upside bias, and briefly touched a high of 1.2176 – the pair’s best level in almost a month. 

However, uncertainty around the Eurozone outlook is limiting EUR/USD strength appeal. EUR/USD is trending a little lower again in the region of 1.2135 at the time of writing. 

Analysts speculate the Euro to US Dollar exchange rate could be in for more gains soon, but the pair may need more upside momentum before that happens. 

Euro (EUR) Exchange Rates Volatile as Coronavirus Woes Weigh on Eurozone 

The Euro has been struggling to capitalise on losses in its rival the US Dollar. This is partially due to broad strength in the Euro’s other rival, the Pound (GBP), but also due to concerns about the Eurozone’s coronavirus situation. 

The Eurozone, which has already suffered from a delayed vaccine rollout and is currently seeing lockdowns across the bloc, continues to face uncertainty about how long the pandemic impact could last. 

Vaccine producer AstraZeneca has once again disappointed by saying it will only be able to deliver around half the original estimated number of vaccines in Q2. According to Yohay Elam, Analyst at FXStreet: 

‘The old continent immunization gap has significant economic implications. Germany is mulling an exit strategy from current restrictions and that will likely be delayed.’ 

US Dollar (USD) Exchange Rates Continue to Struggle amid Signs of Weakness in US Outlook 

The US Dollar continues to be one of the weakest major currencies on the market. Investors have little reason to buy the US currency, as investors are more willing to take risks on coronavirus recovery hopes. 

Vasileios Gkionakis, head of FX strategy at Lombard Odier & Cie, said: 

‘In periods like this, global improvements in GDP growth prospects, which is Dollar-negative, are more important than the rise in US nominal yields, which is Dollar-positive,’ 

Uncertainty around the domestic US economic outlook is weighing on the US Dollar as well. Today’s shock drop in US mortgage applications marks one of the first big signs of how the Texas energy crisis has hurt US economic activity. 

Euro to US Dollar (EUR/USD) Exchange Rate Could Jump Higher on Poor US Growth 

Some analysts believe the Euro to US Dollar exchange rate could see a more sustained movement higher moving forward, but the pair may need a little more momentum before it can make that rally. 

Uncertainty around the Eurozone outlook and US economic hopes are limiting EUR/USD demand. However if upcoming US data disappoints investors, it could even bigger US Dollar losses and the pair could climb. 

Tomorrow will see the publication of some key US ecostats, including durable goods and of course Q4 2020 growth rate data. 

If US growth data disappoints, concerns about the health of the US economy could worsen and the US Dollar could see deeper losses. 

According to Analysts at Credit Suisse, EUR/USD could head even higher if it breaks past certain key levels: 

‘Above 1.2190 should establish a near-term ‘head & shoulders’ base to confirm a move back to the 1.2345/55 highs. Whilst we a fresh rejection from here should be catered for, we continue to look for an eventual break for a move to our 1.2518/98 core long -held target’ 

Thursday will also see the publication of the latest German and Eurozone confidence stats. Overall there is plenty for the Euro to US Dollar (EUR/USD) exchange rate to react to in the coming sessions.