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The euro/dollar fell below key support, will the bears take over in full?
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Hello everyone, today XM Foreign Exchange will bring you "[XM Official Website]: Euro/USD fell below key support, will the bears take over in full?". Hope it will be helpful to you! The original content is as follows:
Euro/USD fell sharply after experiencing last week's fluctuations, with the exchange rate falling below the 1.1600 psychological mark and touching the lower track of the Bollinger Band. On Tuesday (July 29), the European session was trading around 1.1550. In the short term, the market focus will be on the upcoming Fed rate resolution and non-farm employment data that will be released this week. Analysts believe that if the Fed releases hawkish signals and is accompanied by strong employment data, the US dollar may continue to strengthen, pushing the euro to fall into a deeper support range.
Fundamentals
The euro/dollar decline this time is not accidental, but is suppressed by the superposition of three major macro-drivens.
First, the EU-US trade agreement has been boosted by limited support. Although the 15% tariff agreement eased some uncertainty in the short term, the market quickly realized that the move did not fundamentally change the weak European economy. Capital continues to flow out, and internal demand in Europe remains sluggish, limiting the sustainability of the euro's rebound.
Second, the interest rate gap continues to suppress the euro. The ECB maintained the benchmark interest rate at 2.15%, and lacked clear signals for further interest rate hikes; at the same time, the Fed market expected interest rate to remain at 4.50%, forming a spread of up to 235 basis points. This significant interest rate advantage makes the US dollar a target for capital pursuit, and the euro is therefore in a passive pressure.
Third, US economic data continues to exceed expectations. Recent initial jobless claims and durable goods order data show economic resilience. Strong data further strengthened the rationality of the Fed's tightening stance, and also stimulated US dollar buying, causing downward pressure on the euro to continue to increase.
Overall, analysis believes that the fundamental pattern is still significantly biased towards the US dollar; unless the Federal Reserve's future policyThe tone of the policy has changed unexpectedly, and the euro may not usher in a substantial recovery in the short term.
Technical:
From the daily chart of the euro/dollar, the recent trend has gradually shifted from the previous volatile upward trend to a clear downward trend.
The exchange rate previously fell after forming a high point in the 1.1829 stage, and fell continuously below the Bollinger middle track and the 60-day moving average support. It has now reached the Bollinger lower track (1.1552) and approached the key support level of 1.1526. Analysts believe that if the position is lost, the bears are expected to further fall to the 1.1450 area.
The Bollinger band shows signs of opening, indicating that volatility is amplifying. The MACD bar chart is further enlarged, indicating that the bear momentum is strengthened. It may be difficult to see obvious technical rebound signals in the short term.
The Relative Strength Index (RSI) fell to around 41, and although it did not touch the extreme oversold range, it has shown a continuous downward trend. If it falls below the 40 level, the market may further intensify the selling pressure.
To sum up the above analysis, it is believed that the technical signal resonates with the fundamentals, and the short-term exchange rate is still dominated by short positions.
Prevention of Market Sentiment
From the market psychology perspective, the recent rapid reversal of the euro/dollar trend has significantly impacted bullish confidence. After breaking through the 1.1780 liquidity range, market expectations continued to rise, but the sudden decline immediately indicated that the breakthrough was a "false breakthrough", which put the bulls in a passive position.
The market consensus is rapidly turning to the bears, and signs of panic selling are beginning to emerge. Both trading volume and volatility have increased, and funds have obviously flowed to US dollar assets. Market sentiment indicators suggest that fear in the short term will dominate, and reverse funds pouring into US dollar safe-haven assets, putting pressure on the euro.
Future Outlook
Short-term Outlook
Analysts believe that if the Federal Reserve sends hawkish signals in this week's interest rate decision, and the non-farm data continues to perform strongly, the euro/dollar is likely to fall below 1.15 support, directly pointing to the 1.1450 line. If it falls below this level, more stop loss orders will be triggered, and the short target may be extended to the 1.1360 area.
Medium-term Outlook
Analysts believe that if the Federal Reserve policy gradually turns to neutral in the future, or if the US economic momentum shows signs of slowing down, the euro/dollar may find opportunities to stabilize in the medium term and are expected to gradually repair the decline. However, in the context of the still moderate monetary policy of the ECB, any rebound may be subject to the dense resistance of the 1.1660–1.1730 range.
Bules Opportunities
Analysts believe that if the Fed releases dovish signals and the US employment data is lower than expected, the euro may rebound technically from the current low. The first rebound target above is Bollinger's middle track 1.1696. If it breaks through and stabilizes, it is expected to further challenge the 1.1780 area.
Short-continuing risk
Analysts believe that if the interest rate gap and fundamental pattern have not improved, the downward trend of the euro/dollar is likely to continue, and the market may enter a deeper adjustment cycle.
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