On Thursday (February 6th), the foreign exchange market showed some volatility, and the short-term trend of the euro against the US dollar (EUR/USD) remained complex. The euro is currently trading at 1.0361 against the US dollar, down 0.39% for the day. From recent market performance, the trend of the euro is mainly influenced by US economic policies, global political dynamics, and monetary policies of major central banks. The latest developments from the Federal Reserve and the European Central Bank continue to be the focus of market attention. At the same time, the latest developments regarding the situation in Ukraine have also provided some support for the euro. Currently, the market generally expects the euro to remain trading in the range of 1.0360 to 1.0430, lacking significant momentum for a breakthrough in the short term.

Recent market trends and fundamental analysis

In recent days, there have been significant fluctuations in the trend of the euro against the US dollar. Yesterday, the euro briefly broke through the 1.0440 line, but later fell back to around 1.0400 due to a technical correction. According to UOB Group analysts, the euro may fluctuate between 1.0360 and 1.0430 in the short term. Although the market sentiment is slightly optimistic in the short term, the upward potential of the euro is limited due to the overheated state and weakened momentum of the market. Therefore, the medium-term trend of the euro remains uncertain and is expected to fluctuate within the range of 1.0250 to 1.0490.

The trend of the euro is not only influenced by the dynamics of the US dollar, but also constrained by the economic performance of the eurozone. The European Central Bank's recent monetary policy remains cautious, especially against the backdrop of slowing economic growth and ongoing inflationary pressures. The ECB continues to maintain a low interest rate policy to support economic recovery. However, the uneven economic growth among countries in the eurozone, especially the weak economic growth in Germany, may further affect the strength of the euro.

On the other hand, the monetary policy of the United States has also suppressed the euro. The US economy continues to grow, despite facing uncertainty in trade policies, the unemployment rate remains low, and inflationary pressures persist. The Federal Reserve has stated that it will adopt a more cautious attitude in the future while maintaining relatively high interest rates, which has also led to a certain strength of the US dollar in the short term. However, Trump's tariff rhetoric remains a major variable in the market, and investors have doubts about future friction between the United States and major trading partners, which poses potential pressure on the US dollar.

Potential impact of the situation in Ukraine

It is worth noting that the market's attention to the situation in Ukraine has once again increased recently. According to ING analysts, the prices of Ukraine's hard currency bonds have seen a significant increase, reflecting the market's optimism about the easing of the situation. If the tension is eased in the future, the market may provide some support for the euro. Further news about the peace plan is expected to be the focus of market attention at next week's Munich Security Conference.

At present, the economic and political situation in Ukraine remains unstable, which adds uncertainty to the trend of the euro. But if the upcoming US employment data is positive, it may bring a short-term technical rebound for the euro against the US dollar, and may even challenge the 1.0530/70 region again. However, as market concerns about the weakness of the US dollar gradually fade, it is expected that the euro will struggle to maintain a significant increase.

The Weakness of the US Dollar and Long term Outlook

Recently, the US dollar has been under continuous pressure, especially after the Federal Reserve kept interest rates unchanged, and the market's risk appetite has rebounded. The US dollar index (DXY) fell below the support of 108.00, hitting a multi day low. As Trump's tariff rhetoric continues to ferment, market expectations for the future trend of the US dollar are beginning to diverge. Although the weakness of the US dollar may affect the trend of the euro in the short term, in the long run, Trump's trade policies may continue to support the strengthening of the US dollar, especially in the context of intensified global trade frictions.

From a technical perspective, the support level for the euro against the US dollar is temporarily around 1.0200, while the 1.0490 line remains a key resistance level. If it breaks through this level, the euro is expected to further rise, but considering the current market momentum and overheated state, the upward space for the euro seems limited. In the medium term, the oscillation range of 1.0200 to 1.0490 may still be the core of the dominant trend.

The sustained impact of central bank policies

The difference in monetary policies between the European Central Bank and the Federal Reserve will continue to affect the exchange rate trend between the two. Although the Federal Reserve maintains high interest rates, the room for future rate hikes may be limited in the context of slowing economic growth. Relatively speaking, although the European Central Bank continues to implement loose policies, considering the pressure on economic growth, the space for monetary policy tightening is relatively small.

Future Trends and Prospects

Looking ahead, the trend of the euro against the US dollar remains uncertain. In the short term, the market will closely monitor the upcoming release of US non farm payroll data and the development of the situation in Ukraine. If the US employment data is strong, it may provide some support for the US dollar, leading to a further pullback of the euro. However, due to the uncertainty of Trump's tariff policies and the potential recovery of the European economy, the euro may maintain a volatile consolidation trend in the coming period. It is expected that the euro against the US dollar will fluctuate within the range of 1.0250 to 1.0490, unless there are significant policy changes or external shocks.