Three consecutive declines and a middle track: Where is the last trench for Euro bulls?
2025-09-19 17:57:47
On Friday (September 19), the euro fell against the dollar for the third consecutive day, trading around 1.1760 during the European session. This marked a significant decline from the surge above 1.1900 earlier this week. The intraday fluctuations were primarily retracements, with the market rebalancing around key moving averages. The underlying market trend suggests a stronger dollar, but its upward resilience is limited by policy expectations. The euro, constrained by sentiment and official statements, saw its exchange rate shift between offense and defense, accelerating within the 1.17-1.19 range.
This week's US data provided a marginal boost to the US dollar. US initial jobless claims fell by 33,000 to 231,000 last week, beating market expectations for a slight decline from 264,000 to 240,000. The Philadelphia Fed's manufacturing index jumped to 23.2, its highest level since January, compared to -0.3 in August and expectations of 2.3. This data eased concerns about a sharp economic downturn, and coupled with recent stabilization in equity market volatility, the US dollar maintained a "slightly positive" tone. However, interest rate pricing suggests that the market still has a roughly 90% probability of another 25bp rate cut by the Fed in October, with nearly an 80% probability of another 25bp cut in December. Expectations of easing are suppressing the sustainability of the US dollar's upward trend, making the dollar's rebound more of a "data-driven short-term boost" than a trend reversal.
In Europe, the macroeconomic calendar is light, but escalating anti-austerity protests in France are exerting soft pressure on the euro. While there is considerable noise, its concrete impact on growth and policy path remains to be seen. ECB Vice President De Guindos reiterated that the current stance is "moderate" and cautioned that the "easing cycle may not be over." This dovish tone has lowered the euro's risk-free rate potential, making it difficult to expand its relative interest rate differential advantage. Furthermore, the US Supreme Court will rule on the legality of tariff measures on November 5th. This event may have an indirect impact on global commodity prices and cross-border flows, acting as a potential catalyst for medium-term volatility. The market is inclined to preemptively price in premiums to major assets.
Combining these factors: the dollar's fundamental tailwind comes from short-term data recovery, but its headwind comes from pricing in further easing. The euro's headwind comes from sentiment and official statements, but its tailwind comes from passive support if the dollar's gains are limited. These two forces are restraining each other, pushing the euro against the dollar into a phase dominated by technical factors.
The daily chart shows the upper Bollinger Band at 1.1829, the middle at 1.17, and the lower at 1.1574. Earlier this week, the exchange rate briefly tested a high near 1.1918 before retreating. The current price is between the middle and upper bands, indicating a "mean reversion after resistance at the upper edge." The candlestick chart shows three consecutive small-bodied bearish candlesticks, suggesting a technical retracement rather than a sharp reversal. As long as the 1.17 level holds, the short-term validity of the rising channel remains intact.
Regarding the MACD, DIFF is 0.0038, DEA is 0.0031, and histogram is 0.0015 (positive), indicating that the momentum is still above the zero axis, indicating a weak bullish trend. However, the red column is shortening and the fast and slow lines are flattening, suggesting that the upward momentum is slowing down. In the short term, the trend is likely to fluctuate at a high level before re-selection. The RSI (14) is at 55.0622, which is in the neutral to bullish range and not overbought. There is still room for both bulls and bears to operate.
Overall analysis: 1.1829-1.1918 constitutes upper resistance. If it fails to break through, mean reversion will dominate the market. 1.17 provides initial support; a break below it points to a retest of the lower Bollinger Band at 1.1574. Further support lies below at the previous low of 1.1391. Technically, the market is following a three-stage process: "impeded upward momentum, pullback, and reassessment." The gains and losses of the middle Bollinger Band will directly determine the main trend of the next trading week.
From a cross-asset perspective, equity market volatility has subsided and safe-haven assets are under mild pressure, indicating that risk appetite has improved marginally but is not overheated; in line with this on the foreign exchange side: the US dollar was boosted by data but its elasticity was suppressed by expectations of easing, creating an emotional state of "misalignment between fundamentals and interest rate pricing."
Short term (next 1-2 weeks):
Bullish path: If the exchange rate completes a backtest confirmation above 1.17, coupled with the re-expansion of MACD and the rise of RSI, it is expected to restart the impact on 1.1829; once it effectively breaks through 1.1829 and closes above it, the market may test 1.1918 again. If the US policy expectations are eased and the European disturbances subside, a phased upward expansion cannot be ruled out.
Short-term scenario: If the mid-line breaks and the intraday/daily close stabilizes below it, mean reversion will transform into a downward trend, targeting 1.1574. Further expansion will trigger a deeper retracement to 1.1391. At this time, attention should be paid to event catalysts, such as the "front-loaded pricing" of the US Supreme Court's November ruling or the European Central Bank's renewed easing bias.
Fundamentals
This week's US data provided a marginal boost to the US dollar. US initial jobless claims fell by 33,000 to 231,000 last week, beating market expectations for a slight decline from 264,000 to 240,000. The Philadelphia Fed's manufacturing index jumped to 23.2, its highest level since January, compared to -0.3 in August and expectations of 2.3. This data eased concerns about a sharp economic downturn, and coupled with recent stabilization in equity market volatility, the US dollar maintained a "slightly positive" tone. However, interest rate pricing suggests that the market still has a roughly 90% probability of another 25bp rate cut by the Fed in October, with nearly an 80% probability of another 25bp cut in December. Expectations of easing are suppressing the sustainability of the US dollar's upward trend, making the dollar's rebound more of a "data-driven short-term boost" than a trend reversal.
In Europe, the macroeconomic calendar is light, but escalating anti-austerity protests in France are exerting soft pressure on the euro. While there is considerable noise, its concrete impact on growth and policy path remains to be seen. ECB Vice President De Guindos reiterated that the current stance is "moderate" and cautioned that the "easing cycle may not be over." This dovish tone has lowered the euro's risk-free rate potential, making it difficult to expand its relative interest rate differential advantage. Furthermore, the US Supreme Court will rule on the legality of tariff measures on November 5th. This event may have an indirect impact on global commodity prices and cross-border flows, acting as a potential catalyst for medium-term volatility. The market is inclined to preemptively price in premiums to major assets.
Combining these factors: the dollar's fundamental tailwind comes from short-term data recovery, but its headwind comes from pricing in further easing. The euro's headwind comes from sentiment and official statements, but its tailwind comes from passive support if the dollar's gains are limited. These two forces are restraining each other, pushing the euro against the dollar into a phase dominated by technical factors.
Technical aspects:
The daily chart shows the upper Bollinger Band at 1.1829, the middle at 1.17, and the lower at 1.1574. Earlier this week, the exchange rate briefly tested a high near 1.1918 before retreating. The current price is between the middle and upper bands, indicating a "mean reversion after resistance at the upper edge." The candlestick chart shows three consecutive small-bodied bearish candlesticks, suggesting a technical retracement rather than a sharp reversal. As long as the 1.17 level holds, the short-term validity of the rising channel remains intact.
Regarding the MACD, DIFF is 0.0038, DEA is 0.0031, and histogram is 0.0015 (positive), indicating that the momentum is still above the zero axis, indicating a weak bullish trend. However, the red column is shortening and the fast and slow lines are flattening, suggesting that the upward momentum is slowing down. In the short term, the trend is likely to fluctuate at a high level before re-selection. The RSI (14) is at 55.0622, which is in the neutral to bullish range and not overbought. There is still room for both bulls and bears to operate.
Overall analysis: 1.1829-1.1918 constitutes upper resistance. If it fails to break through, mean reversion will dominate the market. 1.17 provides initial support; a break below it points to a retest of the lower Bollinger Band at 1.1574. Further support lies below at the previous low of 1.1391. Technically, the market is following a three-stage process: "impeded upward momentum, pullback, and reassessment." The gains and losses of the middle Bollinger Band will directly determine the main trend of the next trading week.
Market Sentiment Observation
From a cross-asset perspective, equity market volatility has subsided and safe-haven assets are under mild pressure, indicating that risk appetite has improved marginally but is not overheated; in line with this on the foreign exchange side: the US dollar was boosted by data but its elasticity was suppressed by expectations of easing, creating an emotional state of "misalignment between fundamentals and interest rate pricing."
Market Outlook
Short term (next 1-2 weeks):
Bullish path: If the exchange rate completes a backtest confirmation above 1.17, coupled with the re-expansion of MACD and the rise of RSI, it is expected to restart the impact on 1.1829; once it effectively breaks through 1.1829 and closes above it, the market may test 1.1918 again. If the US policy expectations are eased and the European disturbances subside, a phased upward expansion cannot be ruled out.
Short-term scenario: If the mid-line breaks and the intraday/daily close stabilizes below it, mean reversion will transform into a downward trend, targeting 1.1574. Further expansion will trigger a deeper retracement to 1.1391. At this time, attention should be paid to event catalysts, such as the "front-loaded pricing" of the US Supreme Court's November ruling or the European Central Bank's renewed easing bias.
- 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.
