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Calm after the Euro drama? Is it a bull trap or a new trend starting point
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: Calm after the Euro drama? Is it a bull trap or the starting point of a new trend." Hope it will be helpful to you! The original content is as follows:
The US non-farm employment report released last Friday was significantly inferior to market expectations, causing market concerns about the downward risks of the US economy and significantly suppressing the performance of the US dollar. Entering this Tuesday (August 5), the euro against the US dollar (EUR/USD) fell slightly, with trading around 1.1540 during the European session. Although the European economic data has performed weakly, especially the sharp decline in the investor confidence index, the euro remains relatively high due to the rising expectations of the Federal Reserve's interest rate cut.
Brands
The U.S. non-farm employment data in July was far lower than market expectations, recording only 73,000 people, with an expected 110,000 people. The data was also significantly downgraded in the first two months, and was significantly adjusted from 144,000 in May to 19,000, and from 147,000 in June to 14,000. This continuous downward revision reinforces market concerns about a slowdown in the U.S. labor market and quickly ignite expectations for a recession. What further suppressed the US dollar was the weakness of the US manufacturing PMI index. The ISM manufacturing PMI fell from 49.0 to 48.0, indicating that the manufacturing industry has been shrinking continuously, far below the expected 49.5.
On the political level, US President Trump publicly criticized the employment data release agency BLS and removed the director, causing market concerns about the independence of government intervention in statistical institutions; at the same time, Federal Reserve Director Coogler resigned, providing the president with the opportunity to change the candidates for the board of directors, and also exacerbating the market's expectations that monetary policy will be tilted towards dovishness.
In Europe, the Sentix investor confidence index plummeted to -3.7 from 4.5 last month, far below the market expectations of 8.0, indicating that the market is becoming increasingly pessimistic about the economic outlook of the eurozone, reflecting thatThe momentum of economic recovery is weak. In addition, the European and American trade negotiations have been unable to achieve substantial results, and continue to put pressure on the eurozone confidence.
Technical:
From the daily chart, the euro-USD exchange rate rebounded strongly from the lower track of the Bollinger Band (1.1443) last Friday, forming a solid positive line, reaching a maximum of around 1.1600, but failed to effectively break through the middle track of the Bollinger Band (1.1659). After the opening of this week, the price was under slight pressure. Currently, trading is around the 1.1540 line, between the Bollinger's middle and lower tracks, indicating that the market is in a stage of volatile recovery in the short term.
In terms of MACD indicators, the fast and slow line is located below the zero axis, and the green kinetic energy column has been shortened, indicating that the short kinetic energy tends to be exhausted, but no obvious golden cross signal has been formed yet, and the trend reversal still needs further confirmation.
RSI(14) remains around 45, indicating that the exchange rate has not entered the overbought or oversold range, and is in a neutral and weak technical state. Analysts believe that if the price continues to stand above 1.1500, it is expected to test the 1.1600-1.1650 resistance area again in the short term; on the contrary, if it falls below 1.1440, you need to be wary of the 1.1391 and 1.1300 support belts before the decline test.
Preview of market sentiment:
Recently, market sentiment has obviously shifted from the previous "cautious wait-and-see" to "risk aversion". The worsening employment outlook brought by non-farm data has made traders less confident about the outlook for the U.S. economy. The rising Fed's dovish expectations have stimulated the US dollar's recent correction, and also pushed market allocation to hedge and non-US assets.
The probability of the futures market betting on the Federal Reserve's interest rate cut in September has risen rapidly, and some institutions have even begun to expect two interest rate cuts this year. The sharp turn in the interest rate outlook strengthens the risk of the US dollar's systemic pullback and also provides phased support for the euro. However, weak economic data and decline in confidence within the euro zone remain core factors that suppress bulls.
Technical indicators show that the market has entered a stage of emotional recovery, but there is a lack of a clear direction, and a real trend reversal still needs to be formed by market consensus.
The above content is all about "[XM Foreign Exchange Market Review]: Calm after the Euro Drama? Is it a bull trap or the starting point of a new trend" and is carefully xmspot.compiled and edited by the XM Foreign Exchange editor. I hope it will be helpful to your trading! Thanks for the support!
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