The US dollar index is showing signs of fatigue, may the euro usher in an opportunity for a technical rebound?
2025-08-11 17:51:35
During the European session on Monday (August 11), the euro/dollar exchange rate remained in a narrow range around 1.1640, indicating that the market awaited further catalysts. Equity markets displayed a cautiously optimistic risk appetite amidst the current market environment, with focus on upcoming US Consumer Price Index data and the progress of ongoing trade negotiations. Hopes for a peace agreement in Ukraine provided additional support for the euro, particularly as European leaders pressed for Ukrainian President Volodymyr Zelensky to be included in the talks between US and Russia.
In the Eurozone, Italian consumer inflation data confirmed initial expectations of a modest easing in price pressures, while the trade surplus narrowed. Italy's final consumer price index confirmed preliminary data of a 1% contraction in July, with the annualized CPI slowing to 1.7% from 1.8% in June. Furthermore, Italy's trade surplus narrowed to €5.40 billion in June from €6.10 billion in May, contrary to market expectations of an increase to €7.12 billion.
In the US, with today's economic calendar relatively blank, market attention will turn to Tuesday's release of July's CPI data. A further acceleration in US inflation expectations could prompt a reassessment of monetary policy expectations for the coming months. Against this backdrop, these expectations could have a significant impact on most US dollar crosses.
Analysis of the 240-minute technical chart shows a complex technical landscape for the EUR/USD exchange rate. Following a significant downward correction from the 1.1788 high, the price subsequently formed a significant support base near 1.1391. Currently trading around 1.1640, within the middle Bollinger Band area, the price is in a relatively balanced state in the short term.
From a trend structure perspective, the exchange rate is showing a gradual bottoming pattern after a sharp decline. The rising trend line drawn from the 1.1391 low provides effective dynamic support for the exchange rate. Meanwhile, the 1.1698 level constitutes a key resistance level in the near term, a break of which would open up further upside potential.
The Relative Strength Index (RSI) is exhibiting typical characteristics of a volatile market, currently reading 53.13, within neutral territory but slightly slanted towards the bullish side. The RSI is gradually recovering from previously oversold levels, indicating accumulating buying momentum. The indicator's movement is in lockstep with price action, with no significant divergence signals emerging, indicating technical credibility for the current price action.
Current market sentiment is cautiously neutral, with bulls and bears relatively balanced. Mild weakness in the US dollar index provides technical support for the euro, but the market remains awaiting clear directional catalysts. Tuesday's US CPI data is the most significant short-term risk event, with the market expecting it to have a decisive impact on exchange rate trends.
The progress of trade negotiations also affects market risk appetite. While the market remains optimistic about reaching some form of agreement, uncertainty remains, leading traders to adopt a wait-and-see approach. Potential improvements in Europe's geopolitical situation are providing additional support for the euro, but the sustainability of this impact remains to be seen.
Short-term Outlook: From a short-term technical perspective, the EUR/USD exchange rate faces a critical directional moment. A breakout of the 1.1698 resistance level will be crucial for determining future market trends. If the exchange rate can successfully break through this resistance level and hold, it could challenge the 1.1700-1.1720 range and subsequently test higher technical resistance. Conversely, if the exchange rate fails to break through this resistance level, it could retest the 1.1600 support area.
Medium-term outlook: The medium-term trend will largely depend on the evolution of fundamental factors. If US inflation data exceeds expectations, it will reinforce expectations of a hawkish Federal Reserve stance and put pressure on the euro. Conversely, if inflation data is mild, it may provide upward momentum for the euro. The final outcome of trade negotiations will also have a significant impact on the exchange rate's medium-term trend.
Fundamentals:
In the Eurozone, Italian consumer inflation data confirmed initial expectations of a modest easing in price pressures, while the trade surplus narrowed. Italy's final consumer price index confirmed preliminary data of a 1% contraction in July, with the annualized CPI slowing to 1.7% from 1.8% in June. Furthermore, Italy's trade surplus narrowed to €5.40 billion in June from €6.10 billion in May, contrary to market expectations of an increase to €7.12 billion.
In the US, with today's economic calendar relatively blank, market attention will turn to Tuesday's release of July's CPI data. A further acceleration in US inflation expectations could prompt a reassessment of monetary policy expectations for the coming months. Against this backdrop, these expectations could have a significant impact on most US dollar crosses.
Technical aspects:
Analysis of the 240-minute technical chart shows a complex technical landscape for the EUR/USD exchange rate. Following a significant downward correction from the 1.1788 high, the price subsequently formed a significant support base near 1.1391. Currently trading around 1.1640, within the middle Bollinger Band area, the price is in a relatively balanced state in the short term.
From a trend structure perspective, the exchange rate is showing a gradual bottoming pattern after a sharp decline. The rising trend line drawn from the 1.1391 low provides effective dynamic support for the exchange rate. Meanwhile, the 1.1698 level constitutes a key resistance level in the near term, a break of which would open up further upside potential.
The Relative Strength Index (RSI) is exhibiting typical characteristics of a volatile market, currently reading 53.13, within neutral territory but slightly slanted towards the bullish side. The RSI is gradually recovering from previously oversold levels, indicating accumulating buying momentum. The indicator's movement is in lockstep with price action, with no significant divergence signals emerging, indicating technical credibility for the current price action.
Market sentiment observation:
Current market sentiment is cautiously neutral, with bulls and bears relatively balanced. Mild weakness in the US dollar index provides technical support for the euro, but the market remains awaiting clear directional catalysts. Tuesday's US CPI data is the most significant short-term risk event, with the market expecting it to have a decisive impact on exchange rate trends.
The progress of trade negotiations also affects market risk appetite. While the market remains optimistic about reaching some form of agreement, uncertainty remains, leading traders to adopt a wait-and-see approach. Potential improvements in Europe's geopolitical situation are providing additional support for the euro, but the sustainability of this impact remains to be seen.
Market outlook:
Short-term Outlook: From a short-term technical perspective, the EUR/USD exchange rate faces a critical directional moment. A breakout of the 1.1698 resistance level will be crucial for determining future market trends. If the exchange rate can successfully break through this resistance level and hold, it could challenge the 1.1700-1.1720 range and subsequently test higher technical resistance. Conversely, if the exchange rate fails to break through this resistance level, it could retest the 1.1600 support area.
Medium-term outlook: The medium-term trend will largely depend on the evolution of fundamental factors. If US inflation data exceeds expectations, it will reinforce expectations of a hawkish Federal Reserve stance and put pressure on the euro. Conversely, if inflation data is mild, it may provide upward momentum for the euro. The final outcome of trade negotiations will also have a significant impact on the exchange rate's medium-term trend.
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