On Wednesday (September 24th), the euro/dollar exchange rate traded around 1.1790 during the European session, remaining within a narrow range around 1.18 for the past two days. While the headline reading for Europe's September PMI was decent, the sub-items were unconvincing, prompting market speculation that the European Central Bank will enter a longer "observation and assessment period."



In the US, the S&P Global Composite PMI fell from 54.6 to 53.6 in September, with manufacturing falling from 53 to 52.0 and services from 54.5 to 53.9. The survey still predicts continued economic expansion of approximately 2.2% annualized in the third quarter, with inflation exceeding 2% in the coming months. Against this backdrop, Federal Reserve Chairman Powell reiterated the need to "balance risks" between inflation and employment, broadly continuing the tone adopted after last week's meeting. Internal communication within the Fed remains divided: Bowman warned of the risk of "falling behind the curve" and favored decisive rate cuts, while Bostic and others expressed greater concern about sticky inflation. The US dollar index has rebounded to around 97.50, but momentum is uneven due to the cooling PMI figures. With macroeconomic drivers shifting, the euro/dollar pair has entered a period of consolidation, primarily driven by data validation.

Fundamentals:

First, Europe's policy context leans toward a "moderate, steady state" stance. ECB Executive Board member Cipollone stated that inflation risks are "well-balanced," interest rates are "appropriately positioned," and inflation expectations remain well-anchored over the next two years. This suggests that, unless data presents directional surprises, policy will remain patient. For the euro, this helps to lower the uncertainty premium, but it will not provide any new support for interest rate differentials.

Second, the US economy maintains growth and inflation. The decline in the PMI weakened the overheating narrative, but the reading remained in expansionary territory. Coupled with the survey's inflation warning, the dollar did not weaken unilaterally. Powell's "balanced risks" rhetoric reinforced path dependence: the pace of interest rate cuts is guided by evidence of "slowing growth and falling inflation," rather than a pre-set formula.

Third, the interest rate curve signals do not point to a trend reversal. Following Powell's speech, the bullish trend in US Treasuries flattened, suggesting the market is more focused on tail risks to growth and employment. The German and Eurozone bond curves showed minimal fluctuations, highlighting the low-volatility phase of Europe's recovery. Overall, the relative comparison of interest rate differentials and growth hasn't yet revealed a unilateral trend, and short-term trading remains focused on range-bound trading.

Technical aspects:

The daily Bollinger Band is at 1.1716, the upper band at 1.1854, and the lower band at 1.1577. The exchange rate is currently trading at 1.1790, above the middle band and below the upper band, approaching the resistance zone below the upper band. The structural pattern suggests a gradual rise along the middle band, with pressure building near the upper band. From the low of 1.1391 to the recent high of 1.1918, the price has formed a series of rising highs and lows, maintaining the upward trend line. However, the 1.1854-1.1918 range, combined with previous highs and the upper band of the Bollinger Bands, presents a dense resistance zone.



In terms of MACD, DIFF is 0.0038, slightly higher than DEA's 0.0034. The histogram is only 0.0008, a slightly positive value near the zero axis, which is "momentum exists but not strong", more like a gradual climb rather than an accelerated breakthrough; once DIFF falls back and crosses below DEA, it will trigger a short-term retracement signal. The relative strength index RSI (14) is at 55.7583, which is bullish but not overbought, indicating that "upward movement is possible but needs to be confirmed by large volume." Based on this, the resistance level is 1.1854, and above it is 1.1918; the support levels are 1.1750 and the middle line 1.1716. If the middle line is lost, the retracement strength and stop-loss pattern around 1.1577 will be observed below.

Market sentiment observation:

The driving force behind this round of growth has shifted from "policy expectations" to "data verification." Powell's emphasis on balance has prevented the market from betting on aggressive easing. The bullish trend in US Treasuries suggests that defensive hedges against declining growth are gaining momentum, but confidence in a decline in inflation remains insufficient. This misalignment has prevented the dollar from rallying without a clear lead.

The "risk balance" narrative in Europe has reduced the uncertainty premium, and safe-haven buying in the euro has subsided. Combined with the narrow Bollinger Bands and the neutral to bullish RSI, volatility is contracting. Sentiment is not one of extreme greed or fear, but rather one of cautious optimism and a wait-for-catalyst approach.

Market outlook:

In the short term (1-2 weeks), if subsequent high-frequency data from the United States continue to show "growth slowing but not stalling, and inflation falling moderately", the long end of U.S. Treasury bonds may continue to fall, the temporary strength of the U.S. dollar will be limited, and the exchange rate is expected to test 1.1854 again and attack 1.1918; considering that the MACD momentum is limited, the breakthrough is more likely to manifest as a repeated climb of "time for space", and it is necessary to observe whether it is accompanied by continuous positive lines or volume amplification to complete the confirmation.

If US data unexpectedly strengthens or inflation becomes sticky again, and the Fed's hawkish tone pushes up the real interest rate spread, the 1.1790-1.1750 range will be retested, and the middle track 1.1716 is the watershed between strength and weakness; once it effectively falls below, the adjustment target may point to 1.1577. At that time, it will be necessary to observe whether the lower track forms a box rhythm of "stopping the decline and stabilizing-rebounding and retesting".