On Friday (March 7th), the non farm payroll (NFP) data for February in the United States will be released at 21:30 Beijing time, and the market atmosphere is highly tense. The US dollar index has fallen by over 3% this month, with a intraday decline hovering around 0.4%, showing signs of fatigue. Crude oil prices have slightly rebounded, gold prices have fluctuated at high levels, and risk aversion is intertwined with expectations of economic slowdown. Traders are watching tonight's data for directional clues. The rise of the euro is driven by both the weakening of the US dollar and the rebound momentum after technical oversold, but whether it can stand above 1.0850 will depend on non farm payroll data.

Fundamentals and news: US dollar under pressure, Euro breathing heavily

The core focus of this week's market is the health of the US economy. The ISM manufacturing PMI for February fell from 50.9 in January to 50.3, and the employment sub index fell to 47.6, indicating a contraction in manufacturing employment. The Atlanta Fed's GDPNow model has lowered its GDP forecast for the first quarter from -1.5% to -2.8%, with consumer spending and fixed investment growth almost at zero, and signals of a slowdown in the US economy becoming increasingly clear. Adding to the pressure, the US government announced on Tuesday that it would impose a 25% tariff on imported goods from Canada and Mexico, triggering a retaliatory response from Canada. Although the market had long anticipated it, this confrontational situation still leaves investors worried about the prospects of the US economy.

The non farm payroll forecast for tonight is an increase of 160000, slightly improving from January's 143000. The unemployment rate is expected to remain stable at 4%, and the annual increase in hourly wages is expected to remain at 4.1%. But on Wednesday, ADP's private sector employment data only increased by 77000, far below the expected 140000, pouring cold water on the market. If tonight's non farm payroll falls short of expectations, such as below 120000, the probability of the Federal Reserve cutting interest rates by 25 basis points in May may further increase from the current 40%, intensifying the selling pressure on the US dollar and potentially leading to an upward trend for the euro. On the contrary, if the agricultural sector does not exceed expectations, such as breaking through 170000 yuan, the market may postpone the expectation of interest rate cuts, the US dollar may rebound in the short term, and the euro will face downward pressure.

On the eurozone side, the fundamentals are relatively stable, inflationary pressures have eased, and the hawkish stance of the ECB is also softening. Traders generally believe that the current rebound of the euro is more of a "side effect" of the weak US dollar rather than an explosion of its own driving force. However, in the short term, the euro bulls have clearly seized the weakness of the US dollar.

Institutional viewpoint: cautious optimism and divergence coexist

The views of institutional analysts on the trend of the euro are quite insightful. The TD Securities team bluntly stated, "Non farm employment growth in February may remain stable below 150000 for the second consecutive month, which is significantly weaker than the high-frequency data in February last year. We expect the unemployment rate to rise to 4.1%, and wage growth may fall back to a monthly increase of 0.2% due to the normalization of working hours." This statement is cautious, as they clearly do not believe that tonight's data can support the US dollar and are bullish on the euro in the short term.

Analyst Eren Sengezer provided technical guidance: "The daily RSI has broken through 70, and the euro/dollar has entered the overbought zone for the first time since August last year. The short-term key level is at the Fibonacci 61.8% retracement level of 1.0800. If it can stabilize and turn into support, the next target is the integer level of 1.0900, and then up to the 78.6% retracement level of 1.0970. However, if it cannot hold on to the 1.0800, 200 day moving average of 1.0720, it is a strong support, and if it falls below it, it may fall back on 1.0570." His analysis is very pragmatic, indicating both bullish space and warning of pullback risks.

The consensus among well-known institutions is that if tonight's non farm payroll falls short of expectations, coupled with concerns about a slowdown in the US economy, the euro may sprint to 1.0900 or even higher. But they also warn that if the data exceeds expectations, a short-term pullback to the 1.0750-1.0800 range is not surprising.

Technical aspect: Long short game under overbought signals

From the daily chart, the euro against the US dollar has rebounded significantly this week, rising from the low of 1.0570 in early March, with a cumulative increase of over 2.5%. The RSI overbought signal has lit up, and the short-term chasing momentum may weaken, but the bullish trend still dominates. 1.0800-1.0850 is currently the watershed between long and short positions. Standing firm here, bulls have the potential to impact 1.0900; If it falls, it may retrace to the 200 day moving average of 1.0720.

On the 4-hour chart, the MACD golden cross continues, and the moving average system is bullish. The short-term momentum is relatively strong, but the trading volume has not significantly increased, indicating that the willingness of funds to chase after the rise is not firm.

After tonight's non farm payroll announcement, volatility is expected to intensify. The intraday high of 1.0870 may be a breakout signal, while 1.0820 is a short-term support reference. The options market shows an increase in call option holdings around 1.0900 and 1.0950, indicating that institutions have some expectations for the upward potential of the euro.