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EUR/USD spot rate at time of writing: 1.2270Bank transfer rate (indicative guide): 1.1840-1.1930FX specialist providers (indicative guide): 1.2180-1.2200More information on FX specialist rates hereThe Euro-to-Dollar exchange rate (EUR/USD) got the new year off to a flying start by climbing over a percent to 1.23, but the rally could be reaching its zenith according to one foreign exchange strategist we follow.

"We are more focused on the downside given the event risks, for now," says Mazen Issa, Senior FX Strategist at TD Securities.

In fact, a lack of conviction in the Euro's new-year rally has lead TD Securities to make selling the Euro against the U.S. Dollar their "trade of the week".

Strategists at the investment bank are looking to sell EUR/USD at 1.2295, targeting a decline back to 1.20.

"We are keeping a close eye on EUR/USD price action, which has kicked off the new year with familiar lofty price action but potentially stalling around 1.23. A bearish engulfing pattern last week and daily uptrend supports from Nov. and Dec. lows are key focal points that could open up 1.2000/50 supports," says Issa.

Above: The Euro-Dollar uptrend. Secure a money transfer rate just 60 pips away from the market. Learn how here.

The Euro rose sharply against the Dollar, Pound and other major currencies at the start of the new week and year, amidst a firm 'risk on' sentiment amongst investors.

The Euro-Dollar has shown a positive correlation with investor risk sentiment, tending to rise alongside global stock markets. This can be largely explained by the negative correlation the 'safe haven' Dollar tends to have with global markets.

The rally in the exchange rate ultimately fizzled out as the U.S. trading session saw sentiment fade, leading to losses for the world's most significant stock indices on January 04.

Understandably, many foreign exchange analysts we follow say that should the positive global investor environment extend, the Euro-Dollar can go higher but a deterioration in sentiment leaves the pair exposed to decline.

"Bullish sentiment pushed the euro higher on the year’s first trading day. Europe’s single currency soared more than 1% as it held aloft near its 2020 peak. The euro enjoyed double-digit appreciation in 2020 when it rose by 10 cents, or 9%, against its U.S. counterpart, reaching its highest since April 2018," says Joe Manimbo, Senior Market Analyst at Western Union.

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Other strategists also see scope for a potential setback in the Euro's advance.

"EUR-USD has firmed, but its upside may be constrained by COVID-19 related concerns and U.S. political developments," says Clyde Wardle, Senior EM FX Strategist at HSBC.

Wardle says as Covid-19 vaccine roll-outs ramp up, hospitals across the U.S. and parts of Europe are under strain and immunisation bottlenecks could worry investors in the early stages of the year.

The European Union has seen a particularly slow vaccine rollout, with France administering less than a thousand vaccines by January 04. The Pfizer/BioNtech vaccine gained EU-wide approval on December 21.

A slow rollout could mean the Covid-19 crisis lingers longer than many investors had anticipated, raising the prospect of more structural damage being wrought to the economy by the pandemic.

The situation in the U.S. remains a concern, with the U.S. NIAID Director Anthony Fauci warning on Monday that nationally, while Former FDA Commissioner Scott Gottlieb suggested that the new variant has spread to the U.S. and other countries and by March may represent the majority of infections.

"These issues may serve to limit USD weakness should the case and hospitalisation counts result in tighter lockdowns and border controls being imposed in the US and elsewhere. Germany’s lockdown measures are due to end on 10 January, but seem likely to be extended," says Wardle.

Adding to a view that the potential for a near-term technical correction is growing is Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank in London.

"EUR/USD remains bid above the 8-month uptrend at 1.1902 and longer term targets the 2018 high at 1.2556 and the 200-month ma at 1.2624. However, near term we have divergence of the daily RSI that implies a near term correction lower ahead of further gains," says Jones in a note out Tuesday.