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market analysis
The trend of emotional repair is unclear, and the euro is facing a directional choice
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Hello everyone, today XM Foreign Exchange will bring you "[XM Group]: Emotional repair is hard to match, and the euro is facing a directional choice." Hope it will be helpful to you! The original content is as follows:
On Monday (August 4), the euro/dollar was under slightly pressure during the session, and the US market traded around 1.1580 before the session, maintaining a high-level fluctuation pattern after last Friday's big positive line. The exchange rate fell to a low of 1.1391 before the non-farm data was released. It then rebounded rapidly because the US non-farm employment data in July significantly lower than expected, rising more than 190 points in a single day, setting the largest single-day increase in three weeks. The market is currently digesting the possible major impact of this data on the Fed's policy path.
Brands:
The U.S. Department of Labor announced last Friday that the non-farm employment population in July increased by only 73,000, far lower than the market expectations of 110,000. The data in the first two months was significantly downgraded: from 144,000 to 19,000 in May, and from 147,000 to 14,000 in June. This series of data has caused deep concerns about the outlook for the US economy and has stimulated strong bets on the Fed's interest rate cut in September. Data from CMEFedWatch tool shows that the probability of interest rate cuts in September surged from 40% to 80%.
The more explosive incident was: President Trump publicly accused the Bureau of Labor Statistics of tampering with data after the data was released, and immediately fired BLS Director Erika McEntarfer, saying that he "had lost all face to the Republican Party and me." In addition, Fed Director Kugler's announcement of his resignation has made the market more worried about policy independence and future decision-making tendencies. This series of political and economic turmoil has caused the dollar bulls to collapse in the short term, and the euro has taken advantage of the situation to rise.
However, the fundamentals of the eurozone are also difficult to say. The Sentix Investor Confidence Index unexpectedly fell to a three-month low of -3.7, far below the expected 8.0 and also below the previous value of 4.5, indicating that regional economic confidence has deteriorated again.Trade prospects and sluggish domestic demand remain medium- and long-term risk points for the euro.
Technical:
From the daily chart of the euro/dollar chart, after the strong rebound last Friday, the exchange rate is currently running below the Bollinger Band middle track (1.1669). The technical rebound has begun to emerge, but the trend has not reversed. In the MACD indicator, the bar chart is still in the green bar stage, indicating that short momentum is still dominant. The Relative Strength Index (RSI) rebounded from the low level to 48.22. Although it left the oversold zone, it has not yet returned to the strong zone, reflecting that there is still resistance during the rebound.
In terms of the Bollinger band track, the upper rail 1.1885 constitutes a strong medium-term resistance, and the lower rail 1.1454 is the key support at present; analysis believes that if it falls below 1.1454, the exchange rate may hit the previous lower 1.1391; on the contrary, if it can stand on the 1.1669 middle rail, it may be expected to test the 1.1700 integer mark. The recent trend has shown a "technical rebound + trend unknown" pattern, and traders are wary of the risk of false breakthroughs.
Market sentiment observation:
The market is currently entering a period of violent fluctuations and emotional game. The number of dollar shorts has increased significantly due to the chain effect of non-farm data, especially in the context of rising expectations of political interference in the Fed's independence, traders tend to bet on loose policies in advance. However, the euro itself does not provide more convincing fundamental support, and the regional confidence data has weakened significantly, causing some funds to gradually profit and take off in the technological rebound.
Future Outlook:
Short-term Outlook:
In view of the fact that Fed officials will speak out one after another this week, the market is expected to engage in a game around "whether to cut interest rates in advance." With the short-term negative news and political sentiment pushing up, analysts believe that the euro/dollar is expected to continue to fluctuate and rise, but the above 1.1669 to 1.1700 is a medium-term strong resistance zone, so it is necessary to observe whether the volume is broken through.
Medium-term outlook:
From the medium term, the analysis believes that unless the US economic data continues to weaken continuously and the Fed clearly releases a signal of interest rate cuts in September, it will be difficult for the euro to launch a unilateral upward trend; technically, the Bollinger Band opening has not yet expanded significantly and is still in the early stage of range fluctuations. If subsequent European and American economic data continue to differentiate, the exchange rate may test the lower track support of 1.1454 again.
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