On Friday (October 31), the euro traded sideways against the US dollar around 1.1570 during the European session, consolidating in a low range following the sharp decline in the previous trading day. The pair had retreated from a high of around 1.1665 this week, hitting a low of 1.1546, before stabilizing above 1.1554, but failing to regain a foothold above 1.1600.



The market is currently focused on two main themes: first, whether the Federal Reserve's hawkish stance is sufficient to continue supporting the dollar; and second, whether the European Central Bank's decision to hold its deposit rate at 2% has truly killed any expectations of further rate cuts. The overall assessment is that while the dollar still holds an advantage in the short term, the euro's resilience is beginning to emerge, and its subsequent trend may gradually transition from a one-sided decline to wide-range fluctuations.

Fundamental analysis:

First, the ECB's stance provides a "floor" for the euro, but not a "spring." At its latest meeting, the ECB maintained the deposit rate at 2%, and President Lagarde emphasized "balanced risks," effectively signaling to the market that monetary policy will remain stable barring unforeseen circumstances and there will be no rush to lower policy rates again. She also pointed out that risks are not entirely one-sided, with some downside risks easing in recent weeks, while emphasizing that we are currently in a period of "high uncertainty." This statement has two implications: First, the ECB did not provide a timetable for the next rate cut, significantly cooling market bets on "continued easing." Second, the ECB strategically positions itself as an "observer" rather than a "firefighter," which inherently suppresses further dovish speculation. In other words, the ECB's primary objective at this moment is not stimulus, but maintaining the existing interest rate platform to prevent the market from prematurely adopting a "low-interest-rate normal," thereby protecting the euro's interest rate attractiveness. Because some funds had already traded in advance for "faster rate cuts," this unexpectedly hawkish stance gave the euro some breathing room around 1.1550, preventing it from breaking through 1.1500 against the dollar yesterday.

Secondly, the marginal improvement in Eurozone growth data is being used as a support level by the market. Lagarde mentioned that the Eurozone as a whole grew by 0.2% quarter-on-quarter in the third quarter, with France unexpectedly recording a 0.5% quarter-on-quarter growth rate, higher than the market's general expectation for the region's recent growth momentum. Although this is not enough to declare a "recovery," it is enough to establish a logic: the ECB does not need to be overly concerned about growth, and therefore does not need to immediately release additional easing. This combination of "slightly better growth + stable monetary policy" has suppressed the further significant increase in euro short positions in the short term. At the same time, several ECB officials echoed Lagarde's main point in subsequent public statements: the economic outlook is improving marginally, the current policy rate is in an "appropriate position," and there is no urgent reason for further reduction. This series of statements has clearly pushed back the market's idea of further interest rate cuts in December, which has provided some passive support for the euro against the US dollar.

Third, the dominance of the US dollar comes from the tone of the Federal Reserve, not from new data. With the US government still in a shutdown, the non-farm payroll report, normally released on the first Friday of each month, is likely to be absent again, meaning the "hard data" of the labor market cannot be released on time. What does this lack of data mean? It means the market can only amplify its interpretation of the Federal Reserve's words. Fed Chairman Powell's latest statement can be summarized as, "We've already eased once, but don't take this as the start of an easing cycle," and he hinted that "this may be the last rate cut in 2025." On the surface, this isn't a rate hike, but the tone is equivalent to a "verbal rate hike": the dollar index has risen nearly 2% this month as a result, while the euro against the dollar has been pushed down from around 1.1665 to the 1.1546 area. As a result, even though the European Central Bank hasn't turned dovish, the euro against the dollar has still been forced to decline, showing that the Fed's influence is currently greater than the ECB's.

Technical aspects:

Observing the 30-minute candlestick chart, the Euro/USD pair quickly entered a downward trend after forming a temporary high of 1.1665, accompanied by a series of long-bodied bearish candlesticks. A lower shadow appeared for the first time near 1.1577, indicating that buying pressure was beginning to emerge. The exchange rate then rebounded briefly, but encountered strong resistance near 1.1600, suggesting that 1.1600 has become a key short-term resistance level and a "threshold" that the bulls must overcome to turn the tide. After failing to break through effectively, the price retested the lows, reaching 1.1546, before finding support above 1.1554 and gradually entering a horizontal channel consolidation between 1.1560 and 1.1580.



The MACD indicator (26,12,9) shows that DIFF is -0.0002 and DEA is -0.0003, still below the zero axis, but the two lines are beginning to converge. The MACD histogram has gradually turned from the previous green negative bars to slightly red bars, reflecting the weakening of the bearish momentum and the possible momentum replenishment. This is a typical "slowing down" signal. The Relative Strength Index (RSI) (14) is around 48.4785. It is in the oversold zone below 50 but significantly above 30, which is a neutral to slightly weak state. This indicates that the current situation is not a panic sell-off, but rather a slow war of attrition where the bears control the pace at low levels and force the bulls to give up their rebound chips. In summary, the 1.1546-1.1554 area forms the recent static support zone, and 1.1600 is the static resistance line above. As long as there is no volume breakout above 1.1600, the trend is still defined as a consolidation market dominated by downward pressure, rather than a complete reversal.