Driven by a weaker dollar, the euro attracted bargain hunters during the Asian session on Thursday (May 7), halting the decline from the 1.1800 level (a more than two-week high) in the European and American sessions of the previous trading day. The exchange rate is currently trading around 1.1755, up nearly 0.10% on the day, and is still largely influenced by the dynamics of the dollar price.

The dollar was under pressure, with peace expectations being a major drag.

The dollar index failed to capitalize on the previous trading day's rebound from a near three-week low, driven by strong US jobs data, and fell for the second consecutive day under pressure from expectations of a US-Iran peace deal. Specifically, the ADP report showed that US private sector employment increased by 109,000 in April, higher than the previous figure (revised down to 61,000). However, this positive factor was offset by market optimism surrounding a potential agreement to end the war with Iran.

US President Trump signaled optimism on Wednesday, saying that negotiations had made progress in the past 24 hours and that Iran hoped to reach an agreement. Meanwhile, Axios, citing two US officials, reported that the White House is close to reaching a one-page memorandum of understanding with Iran to end the conflict. At the same time, market expectations that the Federal Reserve would maintain a hawkish stance cooled, further weakening the dollar's reserve currency status and providing support for the euro.

Uncertainty remains, so it is not advisable to chase the market excessively.

However, according to data from the CME Group's FedWatch tool, traders still expect the Federal Reserve to raise interest rates before the end of the year. Furthermore, due to the significant differences remaining on the Iranian nuclear issue, investors are reassessing the possibility of a peace agreement between the US and Iran. This uncertainty keeps market sentiment tense and may provide some support for the US dollar. Therefore, investors should remain cautious and avoid aggressively betting on long positions before the euro/dollar pair rises further.

Focus: Non-Farm Payrolls Report

In the short term, traders will focus on macroeconomic data such as German factory orders, the French trade balance, US Challenger job cuts, and weekly initial jobless claims for trading clues. However, the market's core focus will remain on Friday's US non-farm payroll report. In addition, the latest developments in the Middle East crisis are expected to continue to cause market volatility, thereby driving the dollar's performance and creating trading opportunities for the euro against the dollar.

1.1800 becomes a key short-term resistance level.

In the short term, if the exchange rate can hold above the MA20 (1.1735), it is expected to test the psychological level of 1.1800 again.

If the price breaks through 1.1800 and holds above 1.1825 (the 50% retracement of the 1.2081-1.1410 decline), the upside potential will open up further, with the next target at 1.1923 (the 76.4% retracement).

If the 1.1735 support level is breached, the price may retrace to 1.1707 (MA100) to seek support.

The euro/dollar pair currently shows a strong technical bias, with the price firmly above the moving average system, and the bullish trend remains unchanged. However, there is significant selling pressure around the 1.1800 level, and short-term consolidation may be necessary. Friday's US non-farm payroll report will be a key variable in determining whether the exchange rate can break through resistance. In terms of trading strategy, buying on dips or following breakouts are relatively safe approaches.



At 11:10 Beijing time, the euro was trading at 1.1754/55 against the US dollar.