Euro/USD Pair Gained Momentum, Fundamentals are still weak

After tumbling in the last couple of weeks, EUR/USD pair posted modest gains following the second quarter economic release of Euro zone, which showed a growth of 0.3% quarter-over-quarter. On Year-over-year basis, euro-zone generates a growth of 1.6%., which is in line with the guidance issued and also matched analyst consensus estimate.

EUR to USD exchange rate is moving at average of around 1.1210, while the second resistance level and the higher boundary of the existing phase is around 1.12521. On the other hand, initial support is expected around 1.11233 levels.

The growth in the euro zone economy has been providing a support to EUR to USD exchange rate. The latest growth in economy was the result of household demand and strong exports.

Net trade largely contributed to the expansion, adding 0.4%, while household demand added 0.1%.

On the negative side, slow growth from the Euro zone’s top three economies, including France, Italy and Germany, continues to weigh on Euro to USD exchange rate.

EUR to USD currency conversion rate started their momentum at the end of last week following lower-than-expected US labour market and manufacturing data. The payroll number declined higher than expectations to 151k.

However, the strong rally in EUR to U.S. dollar exchange isn’t expected, as the euro zone economy is not growing significantly lower than the U.S.. North American economy is growing at stable rate of around 3%, which is sufficient to provide a support to US dollar exchange rate.

The expected growth in the US interest is also weighing on euro to US dollar conversion rate, as any increase from the Federal Reserve of United States could trigger the currency exchange rate of USD. Therefore, EUR to USD rate is unlikely to make a decent rally in the coming days, while the downside potential is quite high.