This week, the EUR/USD briefly rebounded to the 1.10 level and has now slightly fallen, trading around 1.0980. Dutch international strategists suggest that there may be room for the exchange rate to move towards 1.12 before the end of the third quarter.

After breaking through the resistance level of 61.8% Fibonacci retracement at 1.0935 in the downward trend of December last year on Tuesday, the EUR/USD rebounded to a year to date high around 1.1046 on Wednesday. This allowed the euro to test its downward trend at a 78.6% retracement level of 1.1025, which was the last technical defense near the high of 1.1140 in December last year and could be a bullish signal for the outlook.

The prospect of the US economy and other global interest rates converging to lower levels supports the euro against the US dollar, "said Chris Turner, head of research for the UK and Central and Eastern Europe at Dutch International

In his report to clients on Thursday, he stated, "We believe that the euro dollar exchange rate is supported at 1.0985-1.1000, and if US economic activity data weakens, it may rise to 1.11

Turner and his colleagues stated in their August forecast report that there may be room for the euro to touch 1.12 against the US dollar in the coming weeks, before falling back towards the end of this quarter.

They believe that the recent dovish repricing of the Federal Reserve's interest rate outlook and the resulting compression of the US dollar's yield advantage over the euro are the main driving forces behind the expected recovery.

Another factor that may support the outlook for the euro dollar exchange rate is that since the outbreak of the pandemic, the euro dollar exchange rate has been completely negatively correlated with the twists and turns of the eurozone inflation cycle.

This, as well as the European Central Bank's outlook for continued deflation in the coming months, also means that there is further room for the euro to rebound against the US dollar in the future.