EUR / USD rises from three-week lows at 1.1720 and returns to 1.1750

• EUR / USD bounces to 1.1750 from lows of 1.1720.
• Concerns about further blockades in Europe hurt the euro.
• EUR / USD seen at 1.1600 in three months – Rabobank.

The euro has trimmed losses after falling nearly 0.5% on Wednesday, to a low of 1.1720, and has returned to the midrange of 1.1700 during the last US session.

The euro plunges into concerns of new lockdowns

The common currency has broken below the bottom of the trading range for the past four days, around 1.1785, with the US dollar rising across the board amid strong risk-off sentiment.

Rising COVID-19 cases, with Europe and the United States reporting new records, have reactivated concerns about a new wave of societal restrictions that could derail the fragile economic recovery. These fears were later confirmed when France and Germany announced second national closures.

In addition, the uncertainty about the US presidential elections has further curbed risk appetite. With the distance between frontrunner Joe Biden and Donald Trump looming, investors fear that a contested election could trigger strong price movements.

EUR / USD: Seen at 1.1600 in three months – Rabobank

In a bigger picture, Rabobank’s currency analysis team sees that the second wave of coronavirus and deflation fears will affect the euro in the medium term: “While the huge liquidity facilities implemented by the Federal Reserve this year suggest that The market is unlikely to see anything like the disruption experienced in March for the foreseeable future, we expect the reduced risk appetite to translate into a hedging of USD short positions. We see the EUR / USD at 1.17 on a one-month perspective and we see the risk of a EUR / USD slide to 1.16 in three months. ”