Friday, November 7th. The euro continued its rebound against the dollar, currently trading at 1.1565 in North American trading. The dollar index weakened, with volatility in risk assets and risk aversion alternating as the main drivers of the market. In the absence of official employment and inflation data, the market is cautious about repricing the policy paths of the Federal Reserve and the European Central Bank, leading to a narrow range-bound trading in the euro against the dollar, primarily driven by existing information.



From a macro perspective, the core variables affecting the foreign exchange market this week were concentrated at two ends: first, the recalibration of US macroeconomic and policy expectations; and second, the correction of the divergence between Eurozone fundamentals and price structures. In the US, private sector employment indicators showed a net decrease in jobs in October, coupled with rising expectations of cost-cutting by businesses and AI-related labor substitution, reinforcing the market narrative of "slowing growth." Derivative pricing reflects that the implied probability of a Fed rate cut in December rose from 62% the previous day to approximately 67%, but remains below the level exceeding 90% before last week's meeting. The underlying logic is that without authoritative inflation readings and key observations such as non-farm payrolls, the evidence chain for further easing by the Fed at the end of the year is insufficient. Recent statements by the Chicago Fed president also emphasized that hastily adjusting policy in a data vacuum is not advisable, which marginally suppressed optimistic expectations for rapid rate cuts.

For exchange rates, interest rate expectations are the most direct transmission channel. If the market believes that the Fed's chances of cutting rates in December are not as high as previously thought, then the systemic downside potential of the dollar is weakened, and the euro's rebound against the dollar is more likely to be volatile rather than unilateral. However, the fact that the dollar index gave up its gains and turned negative intraday indicates that funds are more willing to reduce exposure by reducing their dollar long positions in advance during periods without anchored data. The combined result of these two forces is that the euro/dollar exchange rate is frequently changing hands in the 1.15-1.16 range, with increased price elasticity to news but weakened trend continuity.

In Europe, fundamental signals were also mixed. A previous rebound in service sector activity provided brief support for euro-denominated assets; however, the unexpected contraction in September retail sales suggested that the recovery in domestic demand remained weak. In Germany, the trade surplus shrank to €15.3 billion in September, lower than market expectations, with improved exports offset by faster import expansion. The combined effect of these data points is that the ECB faces significant challenges in achieving reflation, growth momentum and price levels have not risen in tandem, and the market is pricing in a greater likelihood of the ECB extending its wait-and-see period. For the euro, this configuration of "low growth, low inflation, and prolonged wait-and-see" is not naturally favorable, but against the backdrop of a blackout in US data and short-term dollar short covering, the negative impact has been offset, and the exchange rate is more reflected in marginal recovery.

Outlook

Several key observation points warrant continued monitoring. First, whether Michigan consumer confidence and inflation expectations can serve as effective alternatives to inflation anchors remains to be seen. An upward reading of inflation expectations could boost the assessment of continued caution from the Federal Reserve, benefiting a short-term rebound in the dollar; a downward reading, however, would help maintain the "small easing at the end of the year" stance, suppressing the dollar. Second, speeches by Fed and ECB officials during this data vacuum period are more valuable for guidance. If the Fed emphasizes "waiting for more evidence" while the ECB stresses "cautious pause," the net change in interest rate differential expectations will be limited, and the euro/dollar exchange rate will remain range-bound. Third, if subsequent high-frequency data from the Eurozone continues to diverge, the market may price euro assets with higher risk premiums, limiting the continuity of the exchange rate's upward movement. Fourth, global stock markets remain prone to sharp fluctuations until valuation disagreements are resolved. The pull of risk appetite on the dollar and safe-haven currencies will remain intermittent, with these "intermittent safe-haven pulses" generally more conducive to range-bound trading than trend extension.

In summary, the core logic behind the current euro/dollar exchange rate is "insufficient interest rate differential driving force, lack of data anchor, and dominance of positioning factors." While fluctuating expectations of interest rate cuts in the US have diminished the dollar's unilateral advantage, growth and demand constraints in Europe limit the euro's independent pricing power.

Technical aspects

The 4-hour chart shows that the euro/dollar pair has recovered after falling from 1.1668 to 1.1468, and is currently trading at 1.1565. The price has returned to the short-term equilibrium zone of 1.1530-1.1580, with the previous high of 1.1569 forming immediate resistance, and 1.1630 representing a higher level of resistance from the previous downward breakout. The MACD fast and slow lines are converging upwards, accompanied by a positive histogram, indicating a shift from bearish to bullish momentum; the RSI has risen to approximately 64, showing strong momentum but approaching a high level, suggesting a potential slowdown. On the downside, watch for a pullback to 1.1530, followed by the densely traded area at 1.1490. Overall, the price action remains within the consolidation range of the rebound that started from 1.1468, and the future direction will depend on the volume and whether key levels are effectively broken.