The EUR/USD pair came under slight intraday pressure on Monday (August 4th), trading around 1.1580 before the US market opened, maintaining its high-volatility pattern following last Friday's bullish candlestick pattern. The pair had previously dipped to a low of 1.1391 before the release of the non-farm payroll data. However, the pair rebounded sharply after the US July non-farm payroll data significantly missed expectations, surging over 190 points in a single day, its largest single-day gain in three weeks. The market is currently digesting the potential significant impact of the data on the Federal Reserve's policy path.

Fundamentals:

Last Friday, the U.S. Department of Labor announced that July's nonfarm payrolls increased by only 73,000, far below market expectations of 110,000. The figures for the previous two months were also significantly revised downwards: May's payroll figures were revised down from 144,000 to 19,000, and June's figures were revised down from 147,000 to 14,000. This series of data has sparked deep market concerns about the U.S. economic outlook and fueled strong bets on a September rate cut by the Federal Reserve. Data from the CME Fed Watch tool indicates that the probability of a September rate cut has surged from 40% to 80%.

Even more explosive was President Trump's public accusation of data manipulation by the Bureau of Labor Statistics after the data release, and he subsequently fired BLS Director Erika McEntarfer, calling her "an embarrassment to the Republican Party and to me." Furthermore, Federal Reserve Board Governor Kugler announced his resignation, further fueling market concerns about policy independence and future decision-making. This series of political and economic turmoil caused a short-term collapse in dollar bulls, leading to a surge in the euro.

However, the eurozone's fundamentals are far from optimistic. The Sentix Investor Confidence Index unexpectedly fell to a three-month low of -3.7, significantly below the expected 8.0 and lower than the previous reading of 4.5, indicating a further deterioration in regional economic confidence. The trade outlook and sluggish domestic demand remain medium- to long-term risks for the euro.

Technical aspects:

Looking at the daily EUR/USD chart, after a strong rebound last Friday, the exchange rate is currently trading below the middle Bollinger Band (1.1669), showing signs of a technical rebound, but the trend has not yet reversed. The MACD histogram remains in the green phase, indicating that bearish momentum remains dominant. The Relative Strength Index (RSI) has rebounded from its low to 48.22, escaping oversold territory but not yet returning to strong territory, indicating that resistance remains in the rebound.



Regarding the Bollinger Bands, the upper band at 1.1885 constitutes strong medium-term resistance, while the lower band at 1.1454 is currently key support. Analysts suggest that a break below 1.1454 could lead to a retest of the previous low of 1.1391. Conversely, a break above the middle band at 1.1669 could potentially test the 1.1700 mark. The recent trend suggests a "technical rebound with an uncertain trend," prompting traders to be wary of the risk of a false breakout.

Market sentiment observation:

The market is currently entering a period of intense volatility and emotional turmoil. Dollar shorts have significantly increased due to the knock-on effects of the non-farm payroll data. Especially amidst growing expectations of political interference in the Federal Reserve's independence, traders are inclined to preemptively bet on loose policy. However, the euro itself lacks compelling fundamental support, and regional confidence data has weakened significantly, leading some funds to gradually take profits during the technical rebound.

Market outlook:

Short-term outlook:
With Federal Reserve officials set to speak out this week, the market is expected to speculate on whether to cut interest rates prematurely. With short-term negative factors exhausted and political sentiment buoying, analysts believe EUR/USD is likely to continue its upward trend. However, the 1.1669 to 1.1700 area represents strong medium-term resistance, and a breakout with significant volume remains to be seen.

Medium-term outlook:
From a medium-term perspective, analysts believe that unless US economic data continues to weaken and the Fed clearly sends a signal of a September rate cut, it will be difficult for the euro to develop a unilateral upward trend; technically, the Bollinger Band opening has not expanded significantly and is still in the early stages of range fluctuations. If subsequent European and American economic data continue to diverge, the exchange rate may once again test the lower support of 1.1454.