- The dollar weakened after Powell confirmed the likelihood of a rate cut.
- The ECB kept interest rates on hold on Thursday, with markets expecting the first rate cut in June.
- A mixed US jobs report revealed some cracks in the US labor market.
The EUR/USD weekly forecast shows upside potential for the pair as investors gain more confidence in a Fed rate cut by June.
EUR/USD ups and downs
EUR/USD finished last week in the green as investors got a clearer picture of Fed policy. Notably, the dollar weakened after Powell confirmed the likelihood of a rate cut before the end of the year. Still, he said the Fed will continue to evaluate incoming data to prove inflation is moving toward its 2% target.
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Meanwhile, the ECB kept rates on hold on Thursday, with markets expecting the first rate cut in June. However, the weakness of the dollar kept the euro up. Furthermore, a mixed US jobs report revealed some cracks in the US labor market, further weakening the dollar. The unemployment rate exceeded forecasts and rose to 3.9%.
Next week’s key events for EUR/USD
Next week, traders will assess consumer and producer inflation reports from the US. Furthermore, there will be a retail sales report. Markets have been speculating about the possible timing of the first rate cut. Last week, Powell said he was awaiting further evidence that inflation was on a downward trend.
Therefore, investors will be watching for signs that headline and core inflation are easing. Falling inflation will fuel bets that the Fed will cut rates in June. On the other hand, if inflation remains persistent, the dollar could recover as rate cut bets decline.
EUR/USD Weekly Technical Forecast: Price is bullish with 0.618 Fib support
On the technical side, EUR/USD is climbing after finding support at the 0.618 Fib retracement level. The bears were able to recapture 61.8% of the previous bullish move before the bulls regained control by breaking above the 22-SMA.
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Initially, the bullish trend stalled at the key resistance level of 1.1100. This allowed the bears to take control. However, the bearish move was temporary. Therefore, the bulls are likely to target the 1.1100 resistance level again. Moreover, a break above this firm resistance would confirm the continuation of the previous bullish move. The bullish trend will continue as long as the price remains above the 22-SMA and the RSI remains in bullish territory above 50.
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