- Data on manufacturing activity in the US raised fears of a recession.
- US non-farm payrolls missed forecasts, showing a drop in demand.
- The dollar fell as interest rate cut expectations rose.
The EUR/USD weekly forecast is bullish as US data continues to support a rate cut at the September Fed meeting.
EUR/USD ups and downs
The EUR/USD pair had a bullish week but closed below its highs as investors reacted to a mix of US economic reports. As the week began, U.S. manufacturing activity data fueled fears of a recession, boosting the dollar. However, it also increased the likelihood of a 50 bps rate cut.
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Meanwhile, employment data shows a weaker labor market with fewer job vacancies and slower private sector growth. At the same time, nonfarm payrolls missed forecasts, showing a drop in demand. However, some positive reports, including business activity in the services sector, jumped. Overall, the dollar fell as expectations for a rate cut rose.
Next week’s key events for EUR/USD
Next week, investors will focus on US inflation data. On Wednesday, the US will release the consumer price index. The latest report showed easing price pressures, approaching the 2% target. However, this time, the Fed has shifted its focus to growth as inflation is already on a steady downward trend.
Recent inflation reports have boosted confidence that high rates have tamed price pressures. As a result, policymakers are likely to cut rates on Wednesday regardless of the outcome. However, a softer-than-expected report could convince them to vote for a 50 basis point rate cut.
Otherwise, there will likely be a 25 bps speed reduction. However, if there is an unexpected jump, it could affect policy moves after September. A less aggressive Fed could boost the dollar, pushing EUR/USD lower.
EUR/USD weekly technical forecast: Price pauses in solid support zone
On the technical side, the EUR/USD price has returned to retest the 22-SMA and the 0.382 Fib level. However, the price stalled above these key support levels, showing that the bears are exhausted. Moreover, it indicates a possible continuation of the bullish trend.
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As the price broke above the resistance at 1.0901, the bullish momentum picked up, pushing the price to the critical level of 1.1201. At the same time, the RSI entered the overbought region. Given the bullish bias, the price may soon bounce off the SMA and make a higher high. Accordingly, EUR/USD could break above 1.1201 in the coming week.
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