The weakness of the downward trend of the euro / dollar has emerged, and the euro bulls may usher in a short-term opportunity to turn to the defensive counterattack!

The euro / dollar weakened sharply on Thursday, reversing its previous gains, with a decline of about 1%; The dollar continued to strengthen, and the change of risk appetite on Wall Street and concerns about the economic outlook of the euro zone became the consensus of the market; The US nonfarm payrolls data will be released on Friday, which may guide the trend of euro / dollar in the short term.

The economic prospects of Europe and the United States are diametrically opposed

The euro / dollar weakened sharply in trading on Thursday, reversing most of the gains previously triggered by the Fed's interest rate decision.

Against the backdrop of the continued strength of the US dollar, the rise in US bond yields and the slowdown in economic growth in the euro zone, the rise of the euro / US dollar is difficult to maintain. It fell by about 1% yesterday and is now steadily approaching the low point in May.

It is worth noting that Germany, as the country with the highest gross domestic product (GDP) in the euro zone, has seen its factory orders decline more than expected, indicating that the country's economy is slowing sharply, which will further raise a question: can the European Central Bank smoothly withdraw from loose monetary policy and return to monetary policy normalization without causing the economy to fall into recession.

In the medium term, the divergence of monetary policy between the European Central Bank and the Federal Reserve, as well as the war between Russia and Ukraine, will continue to exert pressure on the euro / dollar,

It is even possible to push the currency pair to parity, which will be another story.

Looking at the near future, the market will focus on the US nonfarm payrolls data to be released tonight. According to a Bloomberg survey, the United States is expected to create 391000 new jobs in April, slightly lower than 431000 in March; The unemployment rate is expected to fall from 3.6% to 3.5%.

Although from the perspective of the past, the rate of enterprise recruitment remains at a normal level, this non-agricultural employment data may be lower than expected.

A number of economic surveys released this week, including ism manufacturing and ISM services, show that the growth of employment may slow under the circumstances of intensifying labor shortages and tight supply and demand in the job market.

In addition, the employment outlook is not good: the number of new jobs created by ADP in the United States in April was only 247000, less than half of the expected number.

Signs of sluggish growth in the labor market will prompt investors to weaken their expectations for further aggressive interest rate hikes by the Federal Reserve, or cause bond traders to readjust their overly hawkish bets. The yield of US Treasury bonds may fall and pose a negative impact on the US dollar. Of course, this is more likely to work only in the short term.

In short, the euro / dollar may rebound moderately in the next few days, but given the current macroeconomic background and increasingly severe challenges in the euro zone, the rebound may not last long.

Euro / dollar technical analysis

From a technical point of view, the euro / dollar still tends to be bearish: it has just fallen below the long-term key support level, the price trend shows that the euro bulls are unable to fight back, the moving average is still running side by side, and the currency pair is still in a relatively obvious downward trend.

If the decline of euro / US dollar accelerates, the key support below may fall below the low point in May (1.0471), which will not rule out the possibility of further falling to the low point in 2017 (around 1.0340); If the currency pair stabilizes and rebounds, the key resistance is still around 1.0645. Breaking through this resistance will lead to a longer callback to repair the market in the future.