- EUR/USD correction seen gaining momentum

- USD weakness set to abate says Danske Bank

- Goldman Sachs says 1.25 target is still viable

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EUR/USD spot rate at time of writing: 1.1810Bank transfer rate (indicative guide): 1.1383-1.1466FX specialist providers (indicative guide): 1.1619-1.1690More information on FX specialist rates hereThe Euro-to-Dollar exchange rate could be on course to slide below 1.17 according to analysts at ING, who see the Eurozone's period of economic outperformance beginning to fade.

Expectations for a rapid and world leading Eurozone economic recovery were somewhat dented last week following the release of flash PMI data for August, which showed the pace of recovery had slowed.

"The EUR/USD sell-off gained some momentum on Friday when Eurozone August PMIs largely disappointed – led by services. With Covid cases resurgent in many parts of the world, the fear is now that we’ve seen the best of the recovery figures and that V shape expectations will take a knock in September," says Francesco Pesole, FX Strategist at ING.

The Composite PMI for August - which weighs the manufacturing and services figures according to their share of the overall economy - stood at 51.6, below the 54.9 expected and the 54.9 reading from July.

The flash Eurozone Services PMI for August read at 50.1 according to IHS Markit, which is below the 54.5 expected by markets and less than the 54.7 reported in July.

"EUR/USD could briefly dip under 1.17 if the correction gains momentum," says Pesole.

However, ING do not see "wholesale changes taking place to the factors which have driven the rally and thus are happy to keep a one-month target at 1.20".

The Euro-Dollar exchange rate appears to have this week entered a consolidation phase, with technical indicators suggesting upside momentum is waning as the Dollar finds itself better supported.

The Euro-to-Dollar exchange rate is quoted at 1.1837, having been as high as 1.1965 last week ahead of the release of the disappointing PMI data and the broader Dollar comeback.

"In our view, USD weakness is set to abate as doubts about the strength of the reflation story could emerge and European outperformance of U.S. assets is unlikely to last. We see risks in EUR/USD to the downside with target 1.16 in 1M-3M," says Lars Merklin, Senior Analyst at Danske Bank.

Elsewhere in the analyst community, analysts at Goldman Sachs say that while a near-term setback to the Euro-Dollar is possible the pair ultimately remains on course to achieve their forecast target at 1.25.

"Our best guess is that the currency will remain stuck around current levels over the short-term. On the one hand, the region has seen a setback in Covid control, with notably high infection growth in Spain and moderate outbreaks elsewhere, which could affect GDP growth expectations," says Zach Pandl, global co-head of foreign exchange strategy at Goldman Sachs in New York.

Pandl says he could envision a moderate near-term pullback for the Euro.

However, working in the Euro's favour are medium-term flows into the Eurozone which should remain supportive, and will likely prevent a bigger retracement.

"Mutual fund investors have begun to show a preference for non-US assets, and these flows could be substantial if continued due to long-standing Dollar overweights. Moreover, standard momentum-based strategies used by CTAs call for adding to Dollar shorts and Euro longs at current spot levels. After a sharp move higher in July, a period of range-bound trading for the Euro is perhaps not too surprising. Despite the recent pause we maintain our core constructive view on the currency, with a current target of 1.25," says Pandl.