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The decline remains, and the euro bulls are waiting for a good opportunity to counterattack in September?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Group]: The decline remains, the euro bulls are waiting for a good opportunity to counterattack in September?". Hope it will be helpful to you! The original content is as follows:
The euro/dollar exchange rate has been under pressure recently, reaching a low of 1.1400, setting a new low in the past seven weeks. Although the eurozone's second-quarter GDP rose by 0.1% year-on-year, slightly better than expected, it is still not enough to offset market concerns about the eurozone's economic momentum. Meanwhile, strong US macro data and hawkish signals released by the Federal Reserve have given support to the dollar, while the euro remains under pressure.
Fundamentals:
The latest second-quarter GDP data released by the euro zone showed a month-on-month increase of 0.1%. Although it was better than the previous zero growth, judging from the decline of 0.6% of the previous value, economic momentum has slowed significantly. The market originally hoped that the eurozone economy would stabilize from tariff disturbances, but the fact that weak growth and lower inflation have intensified the market's expectations for the European Central Bank's monetary policy to turn dovishly. Although the market currently only counts the year-to-year rate cut expectations of only 15 basis points, as economic data continues to weaken, further pricing space remains.
In contrast, U.S. data showed strong momentum for recovery. The annualized GDP growth rate in the second quarter was as high as 3.0%, far higher than the market expectations of 2.4%. At the same time, the ADP employment report shows that 104,000 new jobs were created in the private sector, which also exceeded market expectations. Against this background, the Federal Reserve kept the policy interest rate unchanged at 4.25%-4.50% as scheduled. Although two officials prefer interest rate cuts, Chairman Powell did not clearly release the tendency to cut interest rates in September in a press conference, emphasizing that "the inflation path is still uncertain", strengthening the market's pricing of "higher and longer" interest rates.
In terms of fundamentals, the euro zone economic slowdown has a sharp contrast with the resilience of the US economy, driving the US dollar index to maintain a high level, the euro/USThe dollar exchange rate continues to be under pressure.
Technical:
From the hourly K-line chart, the euro/dollar has accelerated its downward trend since the high point of 1.1769, showing a significant downward trend. The exchange rate continues to run between the middle and lower rails of the Bollinger Band, and the medium and short-term trend line diverges downward, indicating that the bear-dominated pattern has not yet reversed.
The exchange rate rebounded weakly at the early support level of 1.1480. It is currently under the suppression of the Bollinger middle rail. 1.1480 has now transformed into a clear resistance level. Analysts believe that if the position cannot be firmly established in the future, the support area of 1.1400 may be tested again. Once it falls below 1.1400, it may open the space to test the 1.1300 range downward.
MACD indicator shows that the current DIFF and DEA are still in the negative value area, indicating that the current rebound is a weak technical rebound. The RSI indicator is currently at 39.97, in the weak range, with no signs of oversold repair, and lacks obvious divergence support. The price still has further downward risks under short inertia.
Prevention of market sentiment:
Prevention of market sentiment is significantly biased towards defense. After the exchange rate fell from the high of 1.1769, the market failed to form an effective long defense line, and the rebound momentum was insufficient, indicating that the market is still in a bear-dominated state. As the US dollar continues to benefit from improved economic data and the hawkish stance of the Federal Reserve, the overall market still has a "trend" trading mentality.
In addition, from the perspective of the options market, the increase in implicit volatility of short-term options indicates that the market has high expectations for price fluctuations in the next few days, reflecting that traders are highly alert to downside risks. At the same time, from a position perspective, although the US dollar shorts showed a significant rebound last week, the overall position of the current market has not been extremely tilted, and there is still room for the US dollar longs to exert force.
Future Outlook:
Short-term Outlook: Analysts believe that if the US June PCE price index data released in the evening maintains a moderate upward trend, coupled with the July non-farm employment data to be released on Friday, further verifying economic resilience, the US dollar is expected to continue to gain support, and the exchange rate may continue to fluctuate downward. Pay attention to the effectiveness of the support at the 1.1400 integer mark. Once lost, the support range of 1.1300 will be further tested.
Medium-term Outlook: Analysts believe that if the euro zone data continues to be weak and inflation expectations cool down in the www.xm-forex.coming weeks, it may prompt the ECB to send a clearer dovish signal at its September meeting, when the systemic depreciation faced by the euro will be strengthened. However, from the perspective of seasonality and technical rhythm, the market in August often fluctuates and converges, and the 1.1300 area may build a phased bottom.
Bon scenario: Analysts believe that if the US data is less than expected and the market's expectations of the European Central Bank's stillness increase, the exchange rate is expected to fluctuate and rebound in the short term. Pay attention to whether it can break through the 1.1480 pressure level and further test the resistance above 1.1550.
In the bear scenario: Analysts believe that if non-agricultural employment data are strong and PCE inflation rises instead of falling, the US dollar may meet another round of buying high, and the exchange rate will accelerate to fall by 1.1300, or evenThere is a potential space that reaches 1.1200.
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