Market Watch: Will EUR/USD retreat to 1.14?
2025-08-12 21:56:34
During the North American session on Tuesday (August 12), EUR/USD remained above the key support level of 1.1600, trading in a range-bound manner. US data showed that the Consumer Price Index (CPI) rose 2.7% year-on-year in July, below market expectations of 2.8%. However, the core CPI rose 3.1% year-on-year, higher than the previous 2.9% and the market forecast of 3.0%.
This reflects the strong growth momentum of the US economy and the market's continued positive outlook for the US economy. A lower annual CPI growth rate may reduce expectations of a Fed rate hike, but the rise in the core CPI suggests that inflationary pressures persist, potentially leading the Fed to maintain a more hawkish stance on future monetary policy.
The weakening eurozone economy has also exacerbated downward pressure on the euro against the dollar. Germany's August ZEW economic sentiment survey showed a sharper-than-expected decline in economic confidence, with the index falling from 52.7 to 34.7, well below market expectations of 40. This suggests declining market confidence in the future economic outlook and a growing risk of a European economic slowdown. The generally weak eurozone economic data, particularly Germany's, suggests that the eurozone's recovery remains challenging. Germany's underperformance is likely to continue to put pressure on the euro against the dollar.
Furthermore, the Federal Reserve's policy, a key focus for the market, has not significantly impacted the EUR/USD pair. The Fed's monetary policy will continue to be driven by data, and while market reactions to inflation data have been mixed, the Fed's future actions remain crucial. If the Fed maintains a hawkish stance and further tightens monetary policy, this could push up the dollar and weigh on the euro.
Bollinger Bands Analysis: The compression of the Bollinger Bands suggests relatively low market volatility and a relatively stable consolidation. If the exchange rate breaks below the lower band and fails to rebound effectively, it could test lower support levels, such as 1.1500. Conversely, a break above the upper band could signal a stronger rebound.
MACD indicator: The MACD line remains below the signal line, and the histogram remains in negative territory. This signal indicates that the market remains weak and bearish. Although the MACD does not show a clear reversal signal, the market is still in a range-bound state, so it is important to monitor for the formation of a golden cross, which often signals a potential market reversal.
RSI Analysis: The Relative Strength Index (RSI) is currently at 50.87, indicating neutral market sentiment, with neither strong overbought nor oversold signals. The RSI, near 50, suggests a lack of clear directionality. A break above 50 and above 60 could provide some support for bulls. A break below 50 and into oversold territory could strengthen bearish sentiment.
Support and Resistance: The current support level for EUR/USD is at 1.16. If the exchange rate breaks below this level, it may continue to fall to lower support areas such as 1.1500 and 1.1400. The first resistance above is at 1.1684. If the exchange rate breaks through this resistance level and stays above it, it may rebound further and test higher resistance levels of 1.1700 and 1.1750.
Bullish Outlook: If EUR/USD breaks through the resistance level of 1.1684 and holds above it, the market could potentially re-test 1.1700 and higher. Current technical indicators suggest that the market may still have some upward momentum in the short term, especially ahead of the upcoming Fed speech and economic data releases. If market sentiment turns more optimistic and US economic data comes in below expectations, this could provide some support for the euro and push the exchange rate to test higher.
Bearish Outlook: If EUR/USD fails to break through the current resistance level and remains below 1.1600, a further correction is possible, potentially testing support at 1.1500 or 1.1400. Given the current compression of the Bollinger Bands, the market may be preparing for a significant price swing, thus maintaining the risk of a short position. If the European economy deteriorates further and the Federal Reserve maintains a hawkish stance, bears may gain a greater advantage, pushing the exchange rate further downward.
This reflects the strong growth momentum of the US economy and the market's continued positive outlook for the US economy. A lower annual CPI growth rate may reduce expectations of a Fed rate hike, but the rise in the core CPI suggests that inflationary pressures persist, potentially leading the Fed to maintain a more hawkish stance on future monetary policy.
The weakening eurozone economy has also exacerbated downward pressure on the euro against the dollar. Germany's August ZEW economic sentiment survey showed a sharper-than-expected decline in economic confidence, with the index falling from 52.7 to 34.7, well below market expectations of 40. This suggests declining market confidence in the future economic outlook and a growing risk of a European economic slowdown. The generally weak eurozone economic data, particularly Germany's, suggests that the eurozone's recovery remains challenging. Germany's underperformance is likely to continue to put pressure on the euro against the dollar.
Furthermore, the Federal Reserve's policy, a key focus for the market, has not significantly impacted the EUR/USD pair. The Fed's monetary policy will continue to be driven by data, and while market reactions to inflation data have been mixed, the Fed's future actions remain crucial. If the Fed maintains a hawkish stance and further tightens monetary policy, this could push up the dollar and weigh on the euro.
Technical aspects
Bollinger Bands Analysis: The compression of the Bollinger Bands suggests relatively low market volatility and a relatively stable consolidation. If the exchange rate breaks below the lower band and fails to rebound effectively, it could test lower support levels, such as 1.1500. Conversely, a break above the upper band could signal a stronger rebound.
MACD indicator: The MACD line remains below the signal line, and the histogram remains in negative territory. This signal indicates that the market remains weak and bearish. Although the MACD does not show a clear reversal signal, the market is still in a range-bound state, so it is important to monitor for the formation of a golden cross, which often signals a potential market reversal.
RSI Analysis: The Relative Strength Index (RSI) is currently at 50.87, indicating neutral market sentiment, with neither strong overbought nor oversold signals. The RSI, near 50, suggests a lack of clear directionality. A break above 50 and above 60 could provide some support for bulls. A break below 50 and into oversold territory could strengthen bearish sentiment.
Support and Resistance: The current support level for EUR/USD is at 1.16. If the exchange rate breaks below this level, it may continue to fall to lower support areas such as 1.1500 and 1.1400. The first resistance above is at 1.1684. If the exchange rate breaks through this resistance level and stays above it, it may rebound further and test higher resistance levels of 1.1700 and 1.1750.
Market outlook:
Bullish Outlook: If EUR/USD breaks through the resistance level of 1.1684 and holds above it, the market could potentially re-test 1.1700 and higher. Current technical indicators suggest that the market may still have some upward momentum in the short term, especially ahead of the upcoming Fed speech and economic data releases. If market sentiment turns more optimistic and US economic data comes in below expectations, this could provide some support for the euro and push the exchange rate to test higher.
Bearish Outlook: If EUR/USD fails to break through the current resistance level and remains below 1.1600, a further correction is possible, potentially testing support at 1.1500 or 1.1400. Given the current compression of the Bollinger Bands, the market may be preparing for a significant price swing, thus maintaining the risk of a short position. If the European economy deteriorates further and the Federal Reserve maintains a hawkish stance, bears may gain a greater advantage, pushing the exchange rate further downward.
- 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.
