Holding 1.17 does not mean safety: How far can the euro go?
2025-09-01 16:59:08
The euro maintained a modest upward trend against the dollar during the European session on Monday (September 1st), remaining stable above 1.17 and fluctuating around 1.1730. Last week's US data did not significantly deviate from market expectations, which weakened the dollar's rebound momentum. With the Labor Day holiday in the US, liquidity is weakening and volatility is suppressed, making the euro's upward momentum more stagnant.
While the overall US data released last week did not signal a slowdown, it also failed to shake market hesitation about the dollar. More importantly, trading desks remain focused on several uncertainties: First, the tariff issue remains oscillating within the negotiation framework. While some drafts and intentions have been put on the table, the market is hesitant to make unilateral bets due to inconsistent policy communication and flexible language. Second, geopolitical tensions continue to disrupt risk appetite. Diplomatic mediation on Ukraine has made some progress, but differences remain. Europe and the US are not fully aligned in their strategic pace, making it difficult to quickly unwind defensive positions. Third, while the risk of tail events is small, it remains a constant presence—any unexpected event could trigger a risk-off cycle, leading to a significant short-term re-pricing of major assets.
At a rhythmic level, the Labor Day holiday in the United States has reduced noise on the US dollar funding front, allowing the euro to continue its upward trend. However, in the absence of a major new catalyst, the upward price action appears more like a follow-up reaction to prior expectations of a weaker dollar. Regarding interest rate expectations, the market has already clearly priced in a 25 basis point rate cut at the Federal Reserve's September meeting, and this discounting effect is weighing on the dollar. However, as the interest rate window approaches, if forward guidance becomes more cautious or includes language such as "only one cut, emphasizing data dependence," there is room for a temporary easing of the dollar's momentum. Overall, until new macroeconomic variables materialize, the euro's performance will continue to be driven primarily by relative factors, rather than trends driven by absolute growth and inflation differentials.
The daily chart shows the middle Bollinger Band at 1.1625, the upper Bollinger Band at 1.1782, and the lower Bollinger Band at 1.1467, with a width of approximately 0.0315. This trend is generally flattening, indicating converging medium-term volatility. The exchange rate is currently trading above the middle band and close to the upper half of the range, maintaining a short-term structure of "slow upward movement followed by high-level consolidation." The previous high marked on the chart is 1.1829. The primary static resistance above is the resonance between the upper Bollinger Band at 1.1782 and this previous high. Failure to break through with significant volume could lead to fluctuations near the upper band. Dynamic support below focuses primarily on the middle Bollinger Band at 1.1625, followed by 1.1467 (the lower Bollinger Band) and the previous key low at 1.1391.
On the indicator side, MACD shows DIFF at 0.0015, DEA at 0.0010, and histogram at 0.0010, all above the zero axis but close in value, indicating a "weak bullish trend after blunting" and requiring further support from price or volume to open up the trend. The relative strength index (RSI) (14) reported 56.2646, in the moderately strong range of 50-60, not yet overbought, leaving room for upward resistance testing.
Sentiment remains predominantly cautiously optimistic. Equity market volatility hasn't significantly increased, and safe-haven assets haven't seen a simultaneous surge, indicating that macroeconomic tensions haven't escalated. However, judging by the market's momentum, investors are reluctant to chase upward prices, preferring to capitalize on the dollar's temporary weakness to allocate to European assets and related currencies, resulting in a "shrinking volume rally." In this environment, the narrowing of the Bollinger Bands often indicates that the next phase of market direction will be more dependent on catalysts. If macro news and interest rate expectations resonate, a breakout after the Bollinger Bands squeeze is more likely to occur. In the absence of catalysts, prices will range-bound between the upper and middle bands, trading time for space. From a market perspective, the holding of the 1.17 mark provides a certain anchor for bullish market sentiment, but as prices approach 1.18, "cash-out sentiment" is also accumulating. Any false breakout could easily trigger short-term profit-taking.
Short-term Outlook (1-2 weeks): If macroeconomic indicators remain calm, the euro is likely to remain range-bound. Focus on 1.1782 (the upper Bollinger band), with stronger structural resistance at 1.1829. Focus on 1.1625 (the middle Bollinger band), below which are 1.1467 (the lower Bollinger band) and 1.1391. As long as the price remains above 1.1625, short-term bulls maintain a slight advantage, but a combined bullish candlestick pattern of high volume and momentum indicators is needed for upward confirmation.
Fundamentals:
While the overall US data released last week did not signal a slowdown, it also failed to shake market hesitation about the dollar. More importantly, trading desks remain focused on several uncertainties: First, the tariff issue remains oscillating within the negotiation framework. While some drafts and intentions have been put on the table, the market is hesitant to make unilateral bets due to inconsistent policy communication and flexible language. Second, geopolitical tensions continue to disrupt risk appetite. Diplomatic mediation on Ukraine has made some progress, but differences remain. Europe and the US are not fully aligned in their strategic pace, making it difficult to quickly unwind defensive positions. Third, while the risk of tail events is small, it remains a constant presence—any unexpected event could trigger a risk-off cycle, leading to a significant short-term re-pricing of major assets.
At a rhythmic level, the Labor Day holiday in the United States has reduced noise on the US dollar funding front, allowing the euro to continue its upward trend. However, in the absence of a major new catalyst, the upward price action appears more like a follow-up reaction to prior expectations of a weaker dollar. Regarding interest rate expectations, the market has already clearly priced in a 25 basis point rate cut at the Federal Reserve's September meeting, and this discounting effect is weighing on the dollar. However, as the interest rate window approaches, if forward guidance becomes more cautious or includes language such as "only one cut, emphasizing data dependence," there is room for a temporary easing of the dollar's momentum. Overall, until new macroeconomic variables materialize, the euro's performance will continue to be driven primarily by relative factors, rather than trends driven by absolute growth and inflation differentials.
Technical aspects:
The daily chart shows the middle Bollinger Band at 1.1625, the upper Bollinger Band at 1.1782, and the lower Bollinger Band at 1.1467, with a width of approximately 0.0315. This trend is generally flattening, indicating converging medium-term volatility. The exchange rate is currently trading above the middle band and close to the upper half of the range, maintaining a short-term structure of "slow upward movement followed by high-level consolidation." The previous high marked on the chart is 1.1829. The primary static resistance above is the resonance between the upper Bollinger Band at 1.1782 and this previous high. Failure to break through with significant volume could lead to fluctuations near the upper band. Dynamic support below focuses primarily on the middle Bollinger Band at 1.1625, followed by 1.1467 (the lower Bollinger Band) and the previous key low at 1.1391.
On the indicator side, MACD shows DIFF at 0.0015, DEA at 0.0010, and histogram at 0.0010, all above the zero axis but close in value, indicating a "weak bullish trend after blunting" and requiring further support from price or volume to open up the trend. The relative strength index (RSI) (14) reported 56.2646, in the moderately strong range of 50-60, not yet overbought, leaving room for upward resistance testing.
Market sentiment observation:
Sentiment remains predominantly cautiously optimistic. Equity market volatility hasn't significantly increased, and safe-haven assets haven't seen a simultaneous surge, indicating that macroeconomic tensions haven't escalated. However, judging by the market's momentum, investors are reluctant to chase upward prices, preferring to capitalize on the dollar's temporary weakness to allocate to European assets and related currencies, resulting in a "shrinking volume rally." In this environment, the narrowing of the Bollinger Bands often indicates that the next phase of market direction will be more dependent on catalysts. If macro news and interest rate expectations resonate, a breakout after the Bollinger Bands squeeze is more likely to occur. In the absence of catalysts, prices will range-bound between the upper and middle bands, trading time for space. From a market perspective, the holding of the 1.17 mark provides a certain anchor for bullish market sentiment, but as prices approach 1.18, "cash-out sentiment" is also accumulating. Any false breakout could easily trigger short-term profit-taking.
Market outlook:
Short-term Outlook (1-2 weeks): If macroeconomic indicators remain calm, the euro is likely to remain range-bound. Focus on 1.1782 (the upper Bollinger band), with stronger structural resistance at 1.1829. Focus on 1.1625 (the middle Bollinger band), below which are 1.1467 (the lower Bollinger band) and 1.1391. As long as the price remains above 1.1625, short-term bulls maintain a slight advantage, but a combined bullish candlestick pattern of high volume and momentum indicators is needed for upward confirmation.
- 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.
