The last hope for the bulls! If this level is breached, the euro will return to its "dark downward trend."
2025-11-06 20:36:59
The euro traded around 1.1520 against the dollar during the European session on Thursday (November 6). The recent hourly chart shows a rapid rise from 1.1468 to a test of 1.1523, followed by a slight pullback, but it remains above the neckline. Currently, bulls and bears are locked in a tug-of-war at the intersection of slowing economic growth and a neutral central bank stance, entering a critical short-term decision zone.
Eurozone retail sales fell 0.1% month-on-month in September, marking the third consecutive month of contraction or stagnation, weaker than market expectations of a 0.2% increase. By category, fuel sales continued to decline by 1.0%, non-food sales fell by 0.2%, while food, beverages, and tobacco sales remained flat. Major economies showed mixed performance: Italy -0.6%, the Netherlands -0.4%, and France -0.1%, while Spain +0.4% and Germany +0.2%. Year-on-year growth slowed to 1.0% from 1.6% in August, in line with expectations. This combination suggests that end-user demand remains moderate, and retail sales are facing a real "volume contraction," which constrains the euro's fundamentals and makes it difficult to provide solid endogenous momentum for sustained upward movement.
On the policy front, ECB Vice President Guindos stated in an online event that he was "comfortable" with the current interest rate level and was "more optimistic" about service sector inflation, with wage trends consistent with forecasts. He also emphasized that inflation "has fallen back to a baseline of 2%," and that recent concerns about it being "below target" are likely temporary, and that "there has been no discussion of adjusting quantitative tightening." This stance balances "price declines underway" with "policy remaining on hold," implying a high threshold for further proactive easing in the short term and no rush for further tightening. Regarding exchange rates, the ECB's statements did not provide any new hawkish or dovish signals, focusing instead on data and external financial conditions.
On the US dollar side, sentiment towards the dollar has improved significantly recently, reflected not only in the spot exchange rate but also in the options market: the euro/dollar risk reversal has turned negative again, indicating a rebound in market demand for hedging against euro declines and a decrease in the premium for tail risk of dollar declines. Previously, external uncertainties surrounding tariffs had inflated the pricing of dollar tail risk; however, with the recent easing of tensions, the price of safe-haven hedging has returned to normal, driving a temporary dominance in dollar sentiment. Meanwhile, forward-looking disagreements regarding US monetary policy persist, but the risk of "potential political interference in monetary policy" has not been fully cleared, meaning the dollar is not entirely safe. Overall, fundamentals are slightly neutral to slightly bearish for the euro, while sentiment slightly favors the dollar, meaning short-term exchange rate movements will depend more on technical levels and momentum.
The hourly chart shows that the exchange rate rebounded after a sharp drop from a high of 1.1533 to 1.1472, then fell back to 1.1468, forming a preliminary "W-shaped reversal". Subsequently, it broke through the neckline with increased volume and tested 1.1523. It is currently consolidating above the neckline. The current price is still above the neckline, and the structural bullish trend has not been broken.
Structure and Pattern: The recent "V-shaped reversal + pullback breakout" pattern formed between 1.1468 and 1.1523. The neckline near the purple horizontal line, which was once a resistance level, has now become a support level after the breakout. If the pullback does not break below this level, the "W-shaped reversal" pattern is likely to continue.
Momentum and Indicators: The MACD is above the zero line, the DIFF and DEA are rising in sync, the histogram is expanding in positive value, and there is no typical "top divergence". The RSI (14) is about 63, which is in the "strong range but not overbought", indicating that the momentum is still there but is slowing down at the margin.
Key price zones: On the upside, watch the two adjacent highs of 1.1523 and 1.1533, which form a short-term resistance zone. A significant breakout with strong volume and a close above these levels would open up new Fibonacci extension potential, potentially shifting the trend from a rebound to a minor uptrend. On the downside, watch the neckline area and the 1.149 level for support, with deeper support at 1.1472 and 1.1468, forming a cluster of multiple support levels. A break below 1.1468 would negate the current reversal structure, and the hourly chart would revert to being dominated by the downtrend line.
Short-term (1-3 days): Within the 1.149-1.1533 range, the "mutual confirmation" of technical and sentiment factors will determine the direction. If the hourly chart shows a sustained close above 1.1523 with a breakout on high volume, the probability of an upward move to 1.1533 and subsequent stabilization increases, potentially signaling the start of an upward channel. Conversely, if the price falls below 1.149 with a large bearish candlestick, the structure will shift to a "false breakout + pullback," with 1.1472 and 1.1468 likely to be quickly tested. At that point, it's crucial to watch for signs of a bottoming pattern such as a "morning star" or a "hammer" candlestick.
Medium Term (1-3 Weeks): The baseline scenario is a continuation of the "consolidation market." Limited recovery in Eurozone demand and a neutral stance from the ECB make it difficult to provide sustained fundamental drivers. While sentiment on the US dollar side is improving, it remains constrained by policy and data fluctuations, making it difficult to form a one-sided "bullish market sentiment." Therefore, range trading and trend trading will alternate, with price action concentrated between the neckline and the double top. If subsequent high-frequency Eurozone data stabilizes, and service sector inflation and wages continue to be "in line with forecasts," the euro may experience a mild "valuation repair." Conversely, if consumption weakens again and triggers a reassessment of growth, a break below 1.1468 will push the exchange rate into a "downward channel."
Fundamentals
Eurozone retail sales fell 0.1% month-on-month in September, marking the third consecutive month of contraction or stagnation, weaker than market expectations of a 0.2% increase. By category, fuel sales continued to decline by 1.0%, non-food sales fell by 0.2%, while food, beverages, and tobacco sales remained flat. Major economies showed mixed performance: Italy -0.6%, the Netherlands -0.4%, and France -0.1%, while Spain +0.4% and Germany +0.2%. Year-on-year growth slowed to 1.0% from 1.6% in August, in line with expectations. This combination suggests that end-user demand remains moderate, and retail sales are facing a real "volume contraction," which constrains the euro's fundamentals and makes it difficult to provide solid endogenous momentum for sustained upward movement.
On the policy front, ECB Vice President Guindos stated in an online event that he was "comfortable" with the current interest rate level and was "more optimistic" about service sector inflation, with wage trends consistent with forecasts. He also emphasized that inflation "has fallen back to a baseline of 2%," and that recent concerns about it being "below target" are likely temporary, and that "there has been no discussion of adjusting quantitative tightening." This stance balances "price declines underway" with "policy remaining on hold," implying a high threshold for further proactive easing in the short term and no rush for further tightening. Regarding exchange rates, the ECB's statements did not provide any new hawkish or dovish signals, focusing instead on data and external financial conditions.
On the US dollar side, sentiment towards the dollar has improved significantly recently, reflected not only in the spot exchange rate but also in the options market: the euro/dollar risk reversal has turned negative again, indicating a rebound in market demand for hedging against euro declines and a decrease in the premium for tail risk of dollar declines. Previously, external uncertainties surrounding tariffs had inflated the pricing of dollar tail risk; however, with the recent easing of tensions, the price of safe-haven hedging has returned to normal, driving a temporary dominance in dollar sentiment. Meanwhile, forward-looking disagreements regarding US monetary policy persist, but the risk of "potential political interference in monetary policy" has not been fully cleared, meaning the dollar is not entirely safe. Overall, fundamentals are slightly neutral to slightly bearish for the euro, while sentiment slightly favors the dollar, meaning short-term exchange rate movements will depend more on technical levels and momentum.
Technical aspects:
The hourly chart shows that the exchange rate rebounded after a sharp drop from a high of 1.1533 to 1.1472, then fell back to 1.1468, forming a preliminary "W-shaped reversal". Subsequently, it broke through the neckline with increased volume and tested 1.1523. It is currently consolidating above the neckline. The current price is still above the neckline, and the structural bullish trend has not been broken.
Structure and Pattern: The recent "V-shaped reversal + pullback breakout" pattern formed between 1.1468 and 1.1523. The neckline near the purple horizontal line, which was once a resistance level, has now become a support level after the breakout. If the pullback does not break below this level, the "W-shaped reversal" pattern is likely to continue.
Momentum and Indicators: The MACD is above the zero line, the DIFF and DEA are rising in sync, the histogram is expanding in positive value, and there is no typical "top divergence". The RSI (14) is about 63, which is in the "strong range but not overbought", indicating that the momentum is still there but is slowing down at the margin.
Key price zones: On the upside, watch the two adjacent highs of 1.1523 and 1.1533, which form a short-term resistance zone. A significant breakout with strong volume and a close above these levels would open up new Fibonacci extension potential, potentially shifting the trend from a rebound to a minor uptrend. On the downside, watch the neckline area and the 1.149 level for support, with deeper support at 1.1472 and 1.1468, forming a cluster of multiple support levels. A break below 1.1468 would negate the current reversal structure, and the hourly chart would revert to being dominated by the downtrend line.
Market Outlook
Short-term (1-3 days): Within the 1.149-1.1533 range, the "mutual confirmation" of technical and sentiment factors will determine the direction. If the hourly chart shows a sustained close above 1.1523 with a breakout on high volume, the probability of an upward move to 1.1533 and subsequent stabilization increases, potentially signaling the start of an upward channel. Conversely, if the price falls below 1.149 with a large bearish candlestick, the structure will shift to a "false breakout + pullback," with 1.1472 and 1.1468 likely to be quickly tested. At that point, it's crucial to watch for signs of a bottoming pattern such as a "morning star" or a "hammer" candlestick.
Medium Term (1-3 Weeks): The baseline scenario is a continuation of the "consolidation market." Limited recovery in Eurozone demand and a neutral stance from the ECB make it difficult to provide sustained fundamental drivers. While sentiment on the US dollar side is improving, it remains constrained by policy and data fluctuations, making it difficult to form a one-sided "bullish market sentiment." Therefore, range trading and trend trading will alternate, with price action concentrated between the neckline and the double top. If subsequent high-frequency Eurozone data stabilizes, and service sector inflation and wages continue to be "in line with forecasts," the euro may experience a mild "valuation repair." Conversely, if consumption weakens again and triggers a reassessment of growth, a break below 1.1468 will push the exchange rate into a "downward channel."
- 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.
