The EUR/USD exchange rate has recently shown a high correction, falling from the high of 1.1829, and hit a low of 1.1747 on Wednesday (July 2); it traded near the upper track of the Bollinger Band during the North American session, maintaining a strong and volatile pattern. The current market sentiment is still driven by macroeconomic and political events in the United States, and the US dollar index (DXY) is under pressure after the ADP data was unexpectedly cold; at the same time, the expectations of the Fed's policy path are wavering, and the market's expectations for interest rate cuts this year are intertwined with uncertainty, which has intensified exchange rate fluctuations.



The US ADP employment data unexpectedly fell sharply, with 33,000 private sector jobs falling in June, far less than the expected increase of 95,000. Not only was it the lowest value of the year, but the May data was also revised downward. ADP Chief Economist Nela Richardson pointed out that although layoffs are not yet widespread, the slowdown in recruitment and the failure to fill job vacancies in a timely manner have a negative impact. This trend suggests that the weakening of the job market may be gradually transmitting to the real level of the economy.

At the same time, although the "tax cut package" proposed by US President Trump has been passed in the Senate with Vice President Vance casting a decisive vote, there is still great uncertainty as to whether it can be successfully voted in the House of Representatives; the market has doubts about the strength of fiscal stimulus. In addition, Trump's public criticism of Federal Reserve Chairman Powell has exacerbated the uncertainty of the policy outlook, and the US dollar index is still in a relatively low range.

Technical aspects:

The daily chart of EUR/USD shows that the exchange rate has been rising steadily for many consecutive days, successfully breaking through the resistance of 1.1700 at the end of June, and then hitting a new high of 1.1829, indicating that it is still in an upward trend. From the Bollinger Band indicator, the Bollinger Band opening has widened, and the price has run near the upper track after breaking through, which is a typical Bollinger Band breakthrough pattern, indicating that the current momentum is strong.



The short-term moving average system also shows a bullish arrangement, with the 5-day and 20-day moving averages maintaining a good divergence, with no obvious divergence, indicating that the short-term trend has not yet gotten out of control. The MACD indicator fast and slow lines are above the zero axis, supporting that the current callback is still a healthy consolidation.

However, analysts believe that it is important to note that the RSI indicator is currently above 71, which is in the overbought range, and there is technical correction pressure in the short term. The exchange rate is currently running in a narrow range between 1.1740 and 1.1829. If it effectively falls below the 1.1740 support in the short term, it will trigger the possibility of a short-term retracement to 1.1700.

Market sentiment observation

The overall market sentiment is "cautious but bullish". Market expectations for the Fed to cut interest rates this year are heating up, especially considering that the ADP performance may provide a "warning" for the NFP data, further weakening the medium-term appeal of the US dollar. Analysts believe that although bullish sentiment is currently dominant, the euro has accumulated a large increase. If there is no new catalyst in the short term, the exchange rate may enter a high-level fluctuation stage, and there is a tendency of "rising while adjusting" on the sentiment side.

Outlook

Short-term outlook:
The exchange rate is still consolidating in the 1.1740-1.1829 range in the short term. Analysts believe that if it can hold 1.1740 and stabilize, it will open up space for subsequent tests of 1.1850 or even 1.1900; conversely, if it loses 1.1740, there is a possibility of a rapid pullback to 1.1700, which will constitute a technical retracement.

Mid- to long-term outlook:
Analysts believe that if the Fed sends a clearer dovish signal in future monetary policy, and the European Central Bank remains on the sidelines, the EUR/USD is expected to continue its medium-term bullish trend, and the medium-term target may be 1.20. However, we need to be alert to the evolution of US political risks and uncertainties in the fundamentals of the Eurozone, which may cause fluctuations in the exchange rate.