The range-bound trading pattern may be fraught with danger: Can the euro hold the last line of defense at 1.1470?
2025-11-05 22:12:32
On Wednesday (November 5), the euro continued its weakness against the US dollar during the North American session, trading below the 1.1500 level and currently around 1.1480. Risk aversion continued to rise, providing strong support for the US dollar as a traditional safe-haven currency. Meanwhile, mixed economic data released from the Eurozone failed to provide a significant boost to the euro.
The latest economic data released by the Eurozone shows a clear divergence. Both the Eurozone and German HCOB services Purchasing Managers' Indices (PMIs) exceeded market expectations, indicating accelerated expansion in service sector activity. The final Eurozone HCOB services PMI rose to 53.0 from 51.3, higher than the preliminary reading of 52.6; the final German HCOB services PMI climbed even higher to 54.6, its strongest performance in over a year, far exceeding last month's 51.5 and also higher than the preliminary reading of 54.5. This series of data should have provided support for the euro; however, the weak performance of the Eurozone producer price index offset the positive signals from the services sector.
The Eurozone's Producer Price Index (PPI) fell 0.1% month-on-month in October, continuing the decline from 0.4% in September and weaker than the market expectation of no change. Year-on-year data also showed weakness, with the PPI declining 0.2% year-on-year in October. Although the decline was smaller than the 0.6% drop in the previous month, it still reflects a continued weakening of inflationary pressures on the production side. This data is an important consideration for the European Central Bank's monetary policy decisions, as the continued existence of deflationary pressures may limit the ECB's room for tightening monetary policy.
In Germany, factory orders rose 1.1% month-on-month in September, reversing the 0.4% decline in August and exceeding market expectations of 1% growth. However, year-on-year data revealed concerns, with factory orders falling 4.3% year-on-year in September, a stark contrast to the 2.1% growth in the previous month, highlighting the structural weakness in demand in the German manufacturing sector.
Across the Atlantic, the US government shutdown has entered its fifth week, heading towards the record for the longest shutdown in history. With the lack of official employment data, the ADP employment report and the ISM services PMI have taken on special significance. The market expects October's ADP employment to increase by 25,000 net jobs, an improvement from September's decline of 32,000, but still far below the average monthly increase of 150,000 jobs between 2010 and 2025. As for the ISM services PMI, the market expects a modest rebound to 50.8 in October, an improvement from September's 50.
The actual ADP data showed that U.S. private sector employment increased by 42,000 in October, with annual wage growth of 4.5%. This figure was better than the market expectation of 25,000 and a significant improvement from the revised September figure of a decrease of 29,000 (the initial figure was a decrease of 32,000). Dr. Nera Richardson, ADP's chief economist, pointed out that private employers recorded their first job growth since July in October, but hiring remained cautious compared to earlier this year. Meanwhile, wage growth has been largely flat over the past year, indicating a trend towards equilibrium in the labor supply and demand relationship.
From the perspective of monetary policy path, the Federal Reserve faces the dual challenges of a weak labor market and rising inflation risks, with increasingly apparent differences of opinion among policymakers. Powell cited this divergence as the main reason for cautiously pursuing easing policies, foreshadowing the pause in rate cuts in December.
Observing the 60-minute candlestick chart, after a sharp decline from 1.1540 to 1.1472, the Euro/USD pair is currently consolidating within a range of 1.1470-1.1500. 1.1500, as a key psychological level and a previous support-turned-resistance level, is exerting significant downward pressure on the exchange rate. The price has repeatedly tested this level without a decisive break, indicating heavy selling pressure above. The lower edge of the range at 1.1470 forms important short-term support; a break below this level would open up further downside potential.
The MACD indicator shows that both the DIFF and DEA lines are running below the zero axis, indicating that the overall trend remains bearish. However, the MACD histogram has recently shown noteworthy changes: the green bars are gradually shortening, reflecting a continued weakening of downward momentum; the latest candlestick chart shows the appearance of red bars, suggesting that bearish forces are weakening and bulls are attempting a counterattack. If this signal is confirmed, it may indicate that a short-term bottom is forming. However, the DIFF and DEA lines have not yet formed a golden cross, and the bearish pattern has not yet reversed. The market still needs to observe whether the indicators can form a valid upward cross below the zero axis to confirm a trend reversal signal.
The Relative Strength Index (RSI) is currently at 40.1962, within the neutral-to-weak range of 30-50. It is neither in oversold territory nor showing signs of overbought conditions. The RSI's oscillation within this range indicates relatively cautious market sentiment and a relatively balanced power between bulls and bears. Historically, the RSI touched a low point in early November before rebounding slightly, but subsequently fell back, indicating limited upward momentum. Currently, the RSI is stabilizing around 40. If it can continue to rise and break through the 50 midline, it will provide technical support for the exchange rate; conversely, if it falls below 40 and further tests the 30 oversold zone, the bears will regain control.
Fundamental analysis
The latest economic data released by the Eurozone shows a clear divergence. Both the Eurozone and German HCOB services Purchasing Managers' Indices (PMIs) exceeded market expectations, indicating accelerated expansion in service sector activity. The final Eurozone HCOB services PMI rose to 53.0 from 51.3, higher than the preliminary reading of 52.6; the final German HCOB services PMI climbed even higher to 54.6, its strongest performance in over a year, far exceeding last month's 51.5 and also higher than the preliminary reading of 54.5. This series of data should have provided support for the euro; however, the weak performance of the Eurozone producer price index offset the positive signals from the services sector.
The Eurozone's Producer Price Index (PPI) fell 0.1% month-on-month in October, continuing the decline from 0.4% in September and weaker than the market expectation of no change. Year-on-year data also showed weakness, with the PPI declining 0.2% year-on-year in October. Although the decline was smaller than the 0.6% drop in the previous month, it still reflects a continued weakening of inflationary pressures on the production side. This data is an important consideration for the European Central Bank's monetary policy decisions, as the continued existence of deflationary pressures may limit the ECB's room for tightening monetary policy.
In Germany, factory orders rose 1.1% month-on-month in September, reversing the 0.4% decline in August and exceeding market expectations of 1% growth. However, year-on-year data revealed concerns, with factory orders falling 4.3% year-on-year in September, a stark contrast to the 2.1% growth in the previous month, highlighting the structural weakness in demand in the German manufacturing sector.
Across the Atlantic, the US government shutdown has entered its fifth week, heading towards the record for the longest shutdown in history. With the lack of official employment data, the ADP employment report and the ISM services PMI have taken on special significance. The market expects October's ADP employment to increase by 25,000 net jobs, an improvement from September's decline of 32,000, but still far below the average monthly increase of 150,000 jobs between 2010 and 2025. As for the ISM services PMI, the market expects a modest rebound to 50.8 in October, an improvement from September's 50.
The actual ADP data showed that U.S. private sector employment increased by 42,000 in October, with annual wage growth of 4.5%. This figure was better than the market expectation of 25,000 and a significant improvement from the revised September figure of a decrease of 29,000 (the initial figure was a decrease of 32,000). Dr. Nera Richardson, ADP's chief economist, pointed out that private employers recorded their first job growth since July in October, but hiring remained cautious compared to earlier this year. Meanwhile, wage growth has been largely flat over the past year, indicating a trend towards equilibrium in the labor supply and demand relationship.
From the perspective of monetary policy path, the Federal Reserve faces the dual challenges of a weak labor market and rising inflation risks, with increasingly apparent differences of opinion among policymakers. Powell cited this divergence as the main reason for cautiously pursuing easing policies, foreshadowing the pause in rate cuts in December.
Technical Analysis
Observing the 60-minute candlestick chart, after a sharp decline from 1.1540 to 1.1472, the Euro/USD pair is currently consolidating within a range of 1.1470-1.1500. 1.1500, as a key psychological level and a previous support-turned-resistance level, is exerting significant downward pressure on the exchange rate. The price has repeatedly tested this level without a decisive break, indicating heavy selling pressure above. The lower edge of the range at 1.1470 forms important short-term support; a break below this level would open up further downside potential.
The MACD indicator shows that both the DIFF and DEA lines are running below the zero axis, indicating that the overall trend remains bearish. However, the MACD histogram has recently shown noteworthy changes: the green bars are gradually shortening, reflecting a continued weakening of downward momentum; the latest candlestick chart shows the appearance of red bars, suggesting that bearish forces are weakening and bulls are attempting a counterattack. If this signal is confirmed, it may indicate that a short-term bottom is forming. However, the DIFF and DEA lines have not yet formed a golden cross, and the bearish pattern has not yet reversed. The market still needs to observe whether the indicators can form a valid upward cross below the zero axis to confirm a trend reversal signal.
The Relative Strength Index (RSI) is currently at 40.1962, within the neutral-to-weak range of 30-50. It is neither in oversold territory nor showing signs of overbought conditions. The RSI's oscillation within this range indicates relatively cautious market sentiment and a relatively balanced power between bulls and bears. Historically, the RSI touched a low point in early November before rebounding slightly, but subsequently fell back, indicating limited upward momentum. Currently, the RSI is stabilizing around 40. If it can continue to rise and break through the 50 midline, it will provide technical support for the exchange rate; conversely, if it falls below 40 and further tests the 30 oversold zone, the bears will regain control.
- 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.
