When risk aversion and easing go hand in hand, can EUR/USD still hold up?
2025-10-09 22:04:15
During the North American session on Thursday (October 9), the euro/dollar pair fluctuated around the 1.1600 mark. Since retreating from a high of 1.1819, the exchange rate has fluctuated and weakened; the current gains and losses at the 1.16 integer level are becoming a critical point for directional selection.
This week's news was quiet, yet each piece impacted pricing. On the one hand, the heightened uncertainty surrounding the US federal government shutdown fueled safe-haven buying for the US dollar; on the other hand, domestic instability in France acted as a structural drag on the euro. New Prime Minister Sebastien Le Corny resigned at the beginning of the week, raising market doubts about the feasibility of the budget and reforms.
On monetary policy, the minutes of the September FOMC meeting revealed disagreement among members on the path of interest rate cuts, with an overall dovish bias. New York Fed President John Williams supported further easing in the coming months, citing the slowing decline in inflation and the slowdown in employment momentum as concerns, which has cooled the upward momentum in US Treasury yields. The minutes of the European Central Bank meeting emphasized growing concerns about external uncertainty, but also signaled no urgency for short-term policy adjustments. The committee remains divided on its assessment of inflation risks.
Regarding economic data, Germany's trade surplus widened to €17.2 billion in August, driven by a 1.3% decline in imports. Meanwhile, exports fell another 0.5%, confirming the previous -4.3% month-over-month decline in industrial output in August, indicating continued weakness in the core manufacturing sector. Overall, the eurozone's weak growth and high political noise, coupled with moderate interest rate expectations and strong cash liquidity in the US dollar, maintain the fundamentals of the euro against the US dollar.
The current observation window is the 240-minute candlestick chart. The middle Bollinger Band is at 1.1667, the upper Bollinger Band is at 1.1758, and the lower Bollinger Band is at 1.1577. With the exchange rate trading close to the lower Bollinger Band, the Bollinger Band is slightly opening downward, suggesting a continued downtrend but congested trading below. At the price level, the lower Bollinger Band at 1.1577 forms the first line of defense. If this level breaks, the band will shift downward, potentially leading to a further pullback by bears. On the upside, the middle Bollinger Band at 1.1667 and the proximal resistance level at 1.1650 form a dense resistance zone. Only if this level holds and retraces without breaking above the middle Bollinger Band can a mean reversion to the middle Bollinger Band be established.
In terms of momentum indicators, MACD (26,12,9) DIFF-0.0026, DEA-0.0025, histogram-0.0003, the negative value narrowed, a typical "short momentum weakening and not reversed"; RSI (14) reported 35.6588, below 40 and above 30, weak prevailing rather than extremely oversold.
Key price levels: Support at 1.1577; Resistance at 1.1650, Strong Resistance at 1.1667, Extended Resistance at 1.1758. A break above 1.1667 would allow for a potential retest of 1.1758. A break below 1.1577 could signal a bearish trend.
In the short term (several days), the EUR/USD pair is likely to maintain a consolidation around 1.1600. If Fed officials continue to speak in a dovish manner and French political noise subsides, the exchange rate could experience a "technical rebound-mean reversion" pattern, with 1.1650/1.1667 as the initial target range. A retest confirms a breakout before a potential move towards 1.1758 is possible. Conversely, if the shutdown intensifies or Eurozone data continues to weaken, a break below 1.1577 would open up potential for a pullback to lower levels, revitalizing trend trading.
In the medium term (several weeks to a quarter), we monitor two key indicators: first, the direction of the interest rate differential between Europe and the US; second, the quality of Eurozone growth. If the FOMC cuts interest rates twice this year while the ECB remains on hold, the convergence of interest rate differentials will be positive for the euro, but will not reshape the broader trend. If industrial momentum falters, the euro's fundamentals will outweigh the improvement in interest rate differentials. The baseline scenario maintains "weak volatility, range-bound downward movement": Without clear fundamental improvement or strong policy catalysts, a sustained hold above 1.16 will remain challenging. Only when the RSI returns to 50, the MACD crosses the zero axis, and the Bollinger Bands expand, indicating a "volume breakout," will bulls be able to organize a tradable trend.
Fundamentals:
This week's news was quiet, yet each piece impacted pricing. On the one hand, the heightened uncertainty surrounding the US federal government shutdown fueled safe-haven buying for the US dollar; on the other hand, domestic instability in France acted as a structural drag on the euro. New Prime Minister Sebastien Le Corny resigned at the beginning of the week, raising market doubts about the feasibility of the budget and reforms.
On monetary policy, the minutes of the September FOMC meeting revealed disagreement among members on the path of interest rate cuts, with an overall dovish bias. New York Fed President John Williams supported further easing in the coming months, citing the slowing decline in inflation and the slowdown in employment momentum as concerns, which has cooled the upward momentum in US Treasury yields. The minutes of the European Central Bank meeting emphasized growing concerns about external uncertainty, but also signaled no urgency for short-term policy adjustments. The committee remains divided on its assessment of inflation risks.
Regarding economic data, Germany's trade surplus widened to €17.2 billion in August, driven by a 1.3% decline in imports. Meanwhile, exports fell another 0.5%, confirming the previous -4.3% month-over-month decline in industrial output in August, indicating continued weakness in the core manufacturing sector. Overall, the eurozone's weak growth and high political noise, coupled with moderate interest rate expectations and strong cash liquidity in the US dollar, maintain the fundamentals of the euro against the US dollar.
Technical aspects:
The current observation window is the 240-minute candlestick chart. The middle Bollinger Band is at 1.1667, the upper Bollinger Band is at 1.1758, and the lower Bollinger Band is at 1.1577. With the exchange rate trading close to the lower Bollinger Band, the Bollinger Band is slightly opening downward, suggesting a continued downtrend but congested trading below. At the price level, the lower Bollinger Band at 1.1577 forms the first line of defense. If this level breaks, the band will shift downward, potentially leading to a further pullback by bears. On the upside, the middle Bollinger Band at 1.1667 and the proximal resistance level at 1.1650 form a dense resistance zone. Only if this level holds and retraces without breaking above the middle Bollinger Band can a mean reversion to the middle Bollinger Band be established.
In terms of momentum indicators, MACD (26,12,9) DIFF-0.0026, DEA-0.0025, histogram-0.0003, the negative value narrowed, a typical "short momentum weakening and not reversed"; RSI (14) reported 35.6588, below 40 and above 30, weak prevailing rather than extremely oversold.
Key price levels: Support at 1.1577; Resistance at 1.1650, Strong Resistance at 1.1667, Extended Resistance at 1.1758. A break above 1.1667 would allow for a potential retest of 1.1758. A break below 1.1577 could signal a bearish trend.
Market outlook:
In the short term (several days), the EUR/USD pair is likely to maintain a consolidation around 1.1600. If Fed officials continue to speak in a dovish manner and French political noise subsides, the exchange rate could experience a "technical rebound-mean reversion" pattern, with 1.1650/1.1667 as the initial target range. A retest confirms a breakout before a potential move towards 1.1758 is possible. Conversely, if the shutdown intensifies or Eurozone data continues to weaken, a break below 1.1577 would open up potential for a pullback to lower levels, revitalizing trend trading.
In the medium term (several weeks to a quarter), we monitor two key indicators: first, the direction of the interest rate differential between Europe and the US; second, the quality of Eurozone growth. If the FOMC cuts interest rates twice this year while the ECB remains on hold, the convergence of interest rate differentials will be positive for the euro, but will not reshape the broader trend. If industrial momentum falters, the euro's fundamentals will outweigh the improvement in interest rate differentials. The baseline scenario maintains "weak volatility, range-bound downward movement": Without clear fundamental improvement or strong policy catalysts, a sustained hold above 1.16 will remain challenging. Only when the RSI returns to 50, the MACD crosses the zero axis, and the Bollinger Bands expand, indicating a "volume breakout," will bulls be able to organize a tradable trend.
- 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.
