The dollar's pullback helped the euro, but short-selling pressure has not been relieved
2025-07-18 17:56:07
After hitting a low of 1.1556 yesterday, the EUR/USD pair rebounded modestly on Friday (July 18) in the European session, trading around 1.1635. Yesterday, the US retail sales data for June was much better than expected (0.6% month-on-month growth, expected to be only 0.1%) and the number of initial jobless claims fell to 221,000, the US dollar rose strongly, and the euro continued to be under pressure against the US dollar. However, overnight US corporate earnings reports triggered a rise in risk appetite, driving a corrective rebound in the euro.
Today the market continues to focus on the University of Michigan Consumer Confidence Index. If consumers expect inflation to rise, the US dollar may gain support again, limiting the euro's rebound space.
The continued improvement in recent US economic data has significantly cooled the market's expectations for the Fed's September rate cut. The retail sales data released yesterday not only dispelled concerns about weak consumption, but also strengthened the resilience of the US economy. The number of initial jobless claims fell to 221,000, indicating that the labor market is still strong, further reducing the possibility of the Fed cutting interest rates in the short term.
The US dollar index (DXY) hit a new high this week. Although it fell back to 98.3 due to the risk sentiment of the US stock market overnight, the overall trend is still strong, with a cumulative increase of more than 2% since the second quarter. With the 10-year US Treasury yield returning to the upward channel, the dollar's phased support is taking shape.
In contrast, the eurozone's current account surplus narrowed sharply from 7.3 billion euros in the same period last year to 1 billion euros in May, with a decrease in the surplus in services trade and a widening of the primary income deficit, indicating that both domestic and foreign demand have weakened. In addition, the 2 trillion euro budget plan proposed by the European Commission was strongly opposed by Germany, and the euro lacks fundamental support in the short term.
Overall, the analysis believes that the fundamentals are bullish for the US dollar and bearish for the euro, maintaining a bearish view on EUR/USD in the medium term.
From the K-line structure, the daily chart shows initial signs of a short-term stop in the EUR/USD decline, but the overall trend is still within the correction channel. After testing the low of 1.1556, the exchange rate rebounded to around the middle track of the Bollinger Band at 1.1651 today. If it can effectively break through this level, it is expected to open up further room for repair.
The Bollinger Bands indicator shows that the current Bollinger Bands are in the closing stage, indicating that the market volatility has decreased. The upper band is at 1.1851, the lower band is at 1.1451, and the middle band 1.1651 is the current key resistance level. Analysts believe that if the middle band is broken, the short-term is expected to challenge the 1.1750 line; if the rebound is blocked, the exchange rate may retest the 1.1550 support area again.
From the MACD indicator, the fast line (DIFF) is 0.0033, the slow line (DEA) is 0.0060, and the MACD histogram is -0.0054, indicating that the forces of long and short positions are still in a stalemate, and the short-term trend is weak, but there are signs of stabilization.
The RSI indicator is running at 51.46, close to the neutral level, and has not yet entered the overbought or oversold range. The short-term direction still needs to wait for the exchange rate to break through the Bollinger middle track for confirmation.
Comprehensive analysis shows that the technical side has rebounded in the short term, but the medium-term trend is still bearish, and attention should be paid to the counter-pressure in the 1.1650-1.1700 area.
At present, market sentiment is polarized. On the one hand, strong US consumer and employment data continue to support the dollar bullish expectations; on the other hand, risk sentiment in US stocks rebounded overnight, and the market's safe-haven demand for the dollar eased, providing support for non-US currencies in the short term.
In addition, the market's discussion on the political risks of Fed Chairman Powell has gradually cooled down, further stabilizing the sentiment towards the US dollar. Analysts believe that the short-term sentiment in the foreign exchange market is neutral to bearish, and the US dollar is still expected to remain strong in the long run.
Bullish Outlook:
Analysts believe that if EUR/USD can stabilize at 1.1650 in the short term and break through the 1.1700 area, it is expected to challenge the previous high of 1.1750 or even 1.1829. It requires Federal Reserve officials to continue to release dovish remarks to push the exchange rate to continue to rebound.
Bearish Outlook:
Analysts believe that if the exchange rate rebound is blocked in the 1.1650-1.1700 range, bears may re-emerge and test 1.1556 and the lower Bollinger Band of 1.1451 downwards; in the medium term, if the US dollar continues to benefit from strong fundamentals, EUR/USD is at risk of falling to lower levels.
Today the market continues to focus on the University of Michigan Consumer Confidence Index. If consumers expect inflation to rise, the US dollar may gain support again, limiting the euro's rebound space.
Fundamentals
The continued improvement in recent US economic data has significantly cooled the market's expectations for the Fed's September rate cut. The retail sales data released yesterday not only dispelled concerns about weak consumption, but also strengthened the resilience of the US economy. The number of initial jobless claims fell to 221,000, indicating that the labor market is still strong, further reducing the possibility of the Fed cutting interest rates in the short term.
The US dollar index (DXY) hit a new high this week. Although it fell back to 98.3 due to the risk sentiment of the US stock market overnight, the overall trend is still strong, with a cumulative increase of more than 2% since the second quarter. With the 10-year US Treasury yield returning to the upward channel, the dollar's phased support is taking shape.
In contrast, the eurozone's current account surplus narrowed sharply from 7.3 billion euros in the same period last year to 1 billion euros in May, with a decrease in the surplus in services trade and a widening of the primary income deficit, indicating that both domestic and foreign demand have weakened. In addition, the 2 trillion euro budget plan proposed by the European Commission was strongly opposed by Germany, and the euro lacks fundamental support in the short term.
Overall, the analysis believes that the fundamentals are bullish for the US dollar and bearish for the euro, maintaining a bearish view on EUR/USD in the medium term.
Technical aspects:
From the K-line structure, the daily chart shows initial signs of a short-term stop in the EUR/USD decline, but the overall trend is still within the correction channel. After testing the low of 1.1556, the exchange rate rebounded to around the middle track of the Bollinger Band at 1.1651 today. If it can effectively break through this level, it is expected to open up further room for repair.
The Bollinger Bands indicator shows that the current Bollinger Bands are in the closing stage, indicating that the market volatility has decreased. The upper band is at 1.1851, the lower band is at 1.1451, and the middle band 1.1651 is the current key resistance level. Analysts believe that if the middle band is broken, the short-term is expected to challenge the 1.1750 line; if the rebound is blocked, the exchange rate may retest the 1.1550 support area again.
From the MACD indicator, the fast line (DIFF) is 0.0033, the slow line (DEA) is 0.0060, and the MACD histogram is -0.0054, indicating that the forces of long and short positions are still in a stalemate, and the short-term trend is weak, but there are signs of stabilization.
The RSI indicator is running at 51.46, close to the neutral level, and has not yet entered the overbought or oversold range. The short-term direction still needs to wait for the exchange rate to break through the Bollinger middle track for confirmation.
Comprehensive analysis shows that the technical side has rebounded in the short term, but the medium-term trend is still bearish, and attention should be paid to the counter-pressure in the 1.1650-1.1700 area.
Market sentiment observation:
At present, market sentiment is polarized. On the one hand, strong US consumer and employment data continue to support the dollar bullish expectations; on the other hand, risk sentiment in US stocks rebounded overnight, and the market's safe-haven demand for the dollar eased, providing support for non-US currencies in the short term.
In addition, the market's discussion on the political risks of Fed Chairman Powell has gradually cooled down, further stabilizing the sentiment towards the US dollar. Analysts believe that the short-term sentiment in the foreign exchange market is neutral to bearish, and the US dollar is still expected to remain strong in the long run.
Outlook for the future:
Bullish Outlook:
Analysts believe that if EUR/USD can stabilize at 1.1650 in the short term and break through the 1.1700 area, it is expected to challenge the previous high of 1.1750 or even 1.1829. It requires Federal Reserve officials to continue to release dovish remarks to push the exchange rate to continue to rebound.
Bearish Outlook:
Analysts believe that if the exchange rate rebound is blocked in the 1.1650-1.1700 range, bears may re-emerge and test 1.1556 and the lower Bollinger Band of 1.1451 downwards; in the medium term, if the US dollar continues to benefit from strong fundamentals, EUR/USD is at risk of falling to lower levels.
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