With the Fed’s speech imminent, will the next move for EUR/USD be up or down?
2025-08-06 17:44:29
On Wednesday (August 6), the EUR/USD pair remained in a narrow range, trading around 1.1580 during the European session, generally staying within the 1.1500-1.1600 range and below the middle Bollinger Band. Despite strong Eurozone retail sales data released today, it failed to significantly stimulate exchange rate fluctuations. Technically, the market remains neutral, with cautious wait-and-see sentiment awaiting the next statement from Federal Reserve officials.
Eurozone retail sales grew 3.1% year-on-year in June, exceeding the previous reading of 1.9% and beating market expectations of 2.6%. This marked the largest year-on-year increase since September 2024. Month-on-month, retail sales rose 0.3% in June, rebounding from a revised -0.3% in May, but slightly below market expectations of 0.4%. Among major economies, Germany (0.9%), Spain (1.2%), and Belgium (0.5%) performed particularly well, while France saw a month-on-month decline of 0.9%, weighing on overall growth.
Despite positive overall data, the exchange rate failed to generate upward momentum, reflecting the fragile market confidence in the Eurozone's economic recovery. Meanwhile, in the US, the ISM Services PMI fell from 50.8 in June to 50.1 in July, indicating weakening expansion in the services sector. The employment component, in particular, fell to 46.4, highlighting a slowing labor market. While the prices paid component rose to 69.9, suggesting resilient inflation, the slowdown in overall economic momentum is fueling expectations of a Federal Reserve rate cut.
Currently, the CME FedWatch tool indicates that market expectations for a 25 basis point rate cut by the Federal Reserve in September are nearing 90%. However, if Fed officials release hawkish comments, attempting to hedge market bets, this could trigger a temporary rebound in the dollar. Overall, the fundamentals are mixed, with both bullish and bearish factors, and the exchange rate lacks momentum for a directional move in the short term.
The EUR/USD pair has been volatile and weak since breaking below the middle Bollinger band in late July. The current price is trading below the middle Bollinger band (1.1652) and is repeatedly testing the lower Bollinger band (1.1444), indicating that while the downward trend has slowed, it has not reversed.
The recent candlestick body is small, indicating that neither bulls nor bears have a clear advantage, indicating a typical consolidation pattern. Analysts believe that the upper resistance levels are 1.1620 (100-day moving average) and 1.1660. The lower support levels are 1.1540 (38.2% Fibonacci retracement), 1.1500, and 1.1450 (50% Fibonacci retracement).
In terms of MACD indicators, the MACD histogram continues to narrow, and the DIFF and DEA lines are running below the zero axis. The short-term momentum is weak, but the downward speed has slowed down significantly, and there may be a possibility of building a bottom.
The relative strength index (RSI) (14) hovered around 47.85, indicating a long-short equilibrium. If it can return above 50, it is expected to open up room for a technical rebound; if it falls below 45, it will reaffirm the weak pattern.
Market sentiment remains cautious overall. While fundamental news offers some support, technical patterns and expectations are creating a lack of clear short-term direction for the exchange rate. EUR/USD is currently trading sideways, awaiting a catalyst, and the market is hesitant to act rashly.
From the perspective of option implied volatility, short-term volatility expectations are low, reflecting the market's weak willingness to price in sharp exchange rate fluctuations. The Fear & Greed Index remains neutral, indicating that the market is not experiencing extreme sentiment and that investors are more inclined to wait and see rather than betting on trend continuation or reversal.
In addition, the upcoming round of speeches by Federal Reserve officials is seen as a potential trigger point. If the hawkish stance becomes dominant again, the US dollar will gain short-term support; otherwise, it will further suppress the US dollar and help the euro rebound.
Short-term outlook:
Analysts believe that if the Fed maintains a dovish tone in subsequent statements, coupled with weaker US data, EUR/USD is expected to challenge the resistance areas of 1.1620 and 1.1660, forming a phased rebound. However, if the Fed takes a hawkish stance or inflation expectations rise again, the US dollar may strengthen rapidly, and EUR/USD will face the dual technical support levels of 1.1500 and 1.1450.
Medium- to long-term outlook:
From a medium-term perspective, the Eurozone's economic recovery is not yet solid, and weak French consumer data also suggests significant internal divergence, leading to expectations of ECB easing. Analysts believe that if US inflation remains high and the job market significantly recovers, the US dollar will remain supported in the medium term, and the exchange rate may struggle to break through the key resistance level of 1.1700.
However, considering the cyclical nature of the shift in US monetary policy, if the US enters a substantial interest rate cut channel from September, the euro may usher in a period of temporary strength, and the space above 1.1800 is worth paying attention to.
Fundamentals
Eurozone retail sales grew 3.1% year-on-year in June, exceeding the previous reading of 1.9% and beating market expectations of 2.6%. This marked the largest year-on-year increase since September 2024. Month-on-month, retail sales rose 0.3% in June, rebounding from a revised -0.3% in May, but slightly below market expectations of 0.4%. Among major economies, Germany (0.9%), Spain (1.2%), and Belgium (0.5%) performed particularly well, while France saw a month-on-month decline of 0.9%, weighing on overall growth.
Despite positive overall data, the exchange rate failed to generate upward momentum, reflecting the fragile market confidence in the Eurozone's economic recovery. Meanwhile, in the US, the ISM Services PMI fell from 50.8 in June to 50.1 in July, indicating weakening expansion in the services sector. The employment component, in particular, fell to 46.4, highlighting a slowing labor market. While the prices paid component rose to 69.9, suggesting resilient inflation, the slowdown in overall economic momentum is fueling expectations of a Federal Reserve rate cut.
Currently, the CME FedWatch tool indicates that market expectations for a 25 basis point rate cut by the Federal Reserve in September are nearing 90%. However, if Fed officials release hawkish comments, attempting to hedge market bets, this could trigger a temporary rebound in the dollar. Overall, the fundamentals are mixed, with both bullish and bearish factors, and the exchange rate lacks momentum for a directional move in the short term.
Technical aspects:
The EUR/USD pair has been volatile and weak since breaking below the middle Bollinger band in late July. The current price is trading below the middle Bollinger band (1.1652) and is repeatedly testing the lower Bollinger band (1.1444), indicating that while the downward trend has slowed, it has not reversed.
The recent candlestick body is small, indicating that neither bulls nor bears have a clear advantage, indicating a typical consolidation pattern. Analysts believe that the upper resistance levels are 1.1620 (100-day moving average) and 1.1660. The lower support levels are 1.1540 (38.2% Fibonacci retracement), 1.1500, and 1.1450 (50% Fibonacci retracement).
In terms of MACD indicators, the MACD histogram continues to narrow, and the DIFF and DEA lines are running below the zero axis. The short-term momentum is weak, but the downward speed has slowed down significantly, and there may be a possibility of building a bottom.
The relative strength index (RSI) (14) hovered around 47.85, indicating a long-short equilibrium. If it can return above 50, it is expected to open up room for a technical rebound; if it falls below 45, it will reaffirm the weak pattern.
Market sentiment observation:
Market sentiment remains cautious overall. While fundamental news offers some support, technical patterns and expectations are creating a lack of clear short-term direction for the exchange rate. EUR/USD is currently trading sideways, awaiting a catalyst, and the market is hesitant to act rashly.
From the perspective of option implied volatility, short-term volatility expectations are low, reflecting the market's weak willingness to price in sharp exchange rate fluctuations. The Fear & Greed Index remains neutral, indicating that the market is not experiencing extreme sentiment and that investors are more inclined to wait and see rather than betting on trend continuation or reversal.
In addition, the upcoming round of speeches by Federal Reserve officials is seen as a potential trigger point. If the hawkish stance becomes dominant again, the US dollar will gain short-term support; otherwise, it will further suppress the US dollar and help the euro rebound.
Market outlook:
Short-term outlook:
Analysts believe that if the Fed maintains a dovish tone in subsequent statements, coupled with weaker US data, EUR/USD is expected to challenge the resistance areas of 1.1620 and 1.1660, forming a phased rebound. However, if the Fed takes a hawkish stance or inflation expectations rise again, the US dollar may strengthen rapidly, and EUR/USD will face the dual technical support levels of 1.1500 and 1.1450.
Medium- to long-term outlook:
From a medium-term perspective, the Eurozone's economic recovery is not yet solid, and weak French consumer data also suggests significant internal divergence, leading to expectations of ECB easing. Analysts believe that if US inflation remains high and the job market significantly recovers, the US dollar will remain supported in the medium term, and the exchange rate may struggle to break through the key resistance level of 1.1700.
However, considering the cyclical nature of the shift in US monetary policy, if the US enters a substantial interest rate cut channel from September, the euro may usher in a period of temporary strength, and the space above 1.1800 is worth paying attention to.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
