- The EUR/USD weekly forecast points to a corrective downside despite the pair ending the week with net gains, as the US dollar recovered slightly.
- Upbeat US PPI and the Fed’s hold in its recent meeting lent room to the falling dollar.
- The markets will closely watch the ECB rate decision and US employment data for further impetus.
EUR/USD was turbulent but pro-euro this week. The US dollar fell to multi-year lows before recovering. The dollar faced geopolitical concerns and concerns about Fed independence. However, the sentiment improved after President Trump and the Senate avoided a potential government shutdown.
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Moreover, the nomination of former Fed Governor Kevin Warsh as the next Fed Chair also helped stabilize the dollar, as markets saw it as supportive of central?bank autonomy.
US data sent mixed signals as factory orders beat expectations, but initial jobless claims rose, and the trade deficit widened. Also, Producer Price Index figures showed sticky inflation, with stronger-than-forecast PPI and Core PPI readings.
This reinforced the view that the Fed will be cautious about cutting rates aggressively. Comments from Atlanta Fed President Raphael Bostic underlined that inflation is still too high and that the Fed should be patient, keeping the bar high for near-term easing.
In the Eurozone, fundamentals were modestly supportive for the euro. Eurozone Q4 GDP and German GDP exceeded forecasts, pointing to a still?resilient, if modest, growth backdrop. German inflation hovered close to the ECB’s target, with HICP and core measures broadly stable.
Analysts at Rabobank, TD Securities, and Brown Brothers Harriman expect the ECB to keep the deposit rate around 2.00% for an extended period. They see little urgency for cuts or hikes, even as the euro’s strength raises some concerns about competitiveness.
On the other hand, strategists at Nordea and UOB highlight the risk of a multi-year US dollar down cycle. Historical patterns of prolonged dollar declines after peaks and shifting foreign?investor behavior support this view. Their projections see room for further EUR/USD gains over the coming years, provided Eurozone growth and inflation remain contained, and the ECB stays broadly steady.
EUR/USD Key Events Next Week:
Next week, EUR/USD traders will focus on a dense calendar of high-impact releases:
- ECB Refinancing Rate and Press Conference
- US ISM Manufacturing/Services PMIs
- JOLTs Job Openings
- ADP Non-Farm Employment Change
- Average Hourly Earnings m/m
- US Unemployment Rate
- Preliminary UoM Consumer Sentiment
- Preliminary UoM Inflation Expectations
The ECB is widely expected to maintain rates, with a cautious, data-dependent tone, with any pushback against euro strength watched closely. On the US side, labor-market data and wages will be crucial for refining the Fed’s rate expectations. Any considerable surprise in NFP or unemployment could trigger sharp EUR/USD moves as markets reassess the relative policy outlooks.
EUR/USD Weekly Technical Forecast: Corrective Downside Under 1.19
The EUR/USD daily chart shows a correction from more than 4-year highs above 1.2000. The pair fell back below the broken supply zone, correcting below the 1.1900 mark. The RSI is now off the overbought region, gradually retreating, revealing underlying weakness. However, the key MAs remain bullish, providing strong support for the pair.
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The downside could find key support at the bullish gap near 1.1830, ahead of the horizontal level at 1.1800. On the upside, the price needs acceptance above the 1.2000 psychological mark to sustain the bullish momentum and aim for 1.2100 ahead of 1.2200.
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