- The EUR/USD weekly forecast remains upside, staying above 1.1700.
- The weaker US dollar lends more support to the euro amid the Fed’s policy outlook and poor economic data.
- Markets are now eyeing US ADP and NFP data along with the Fed Chair’s speech.
The EUR/USD price ended the month with a solid bullish momentum, closing the week slightly off the highs of 1.1754, which is the highest level since September 2021. The pair marked a 2% weekly gain as the dollar saw a sharp deterioration amid geopolitical relief, soft US data, and growing pressure on the Fed to cut the rates.
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What Happened with EUR/USD Last Week?
The week started with intense market jitters as the US attacked three nuclear sites of Iran, which weighed heavily on the Euro and increased the demand for the dollar as a safe-haven asset. However, the truce came sooner as President Trump announced a ceasefire between Iran and Israel. As a result, oil prices fell, equities and the euro rebounded, while the safe-haven dollar suffered losses.
Greenback’s sentiment deteriorated after Fed Chair Powell’s testimony before Congress. He maintained a cautious tone, signaling no rush to cut the rates. However, he acknowledged the impact of tariffs on inflation. These comments provoked President Trump, who publicly criticized the Fed Chair and hinted at replacing him before the end of the year. This raised concerns over the Fed’s credibility, resulting in weighing on the dollar and boosting EUR/USD.
On Friday, the US Core PCE Price Index came at 2.7% y/y, briefly above expectations. However, the Q1 GDP showed a 0.5% contraction, and June’s PMI reading edged down to 52.8, indicating slowing momentum. The Durable Goods Orders data remained upbeat, but this was mainly due to one volatile component: aircraft orders.
Contrarily, the EU data remained stable with the HCOB PMI at 50.2, reflecting stagnation in activity but not contraction. Expectations around fiscal stimulus plans are providing long-term tailwinds for the euro.
EUR/USD Key Events Next Week
On the European site, the markets will focus on Germany’s retail sales data, along with HICP inflation data. Moreover, the Eurozone CPI will also be the key data to watch.
From the US, key events include ADP employment, JOLTs, ISM PMIs, NFP, and the Fed Chair’s speech. However, the labor market data is more critical, as the Fed is watching cooling signs to plan its easing policy. The ADP is expected to increase, while the NFP is likely to continue its modest decline. Additionally, the unemployment rate may rise slightly.
EUR/USD Weekly Technical Forecast: Probable Pullback amid Oversold Condition
The daily chart for the EUR/USD shows a strong upside trend, with eyes on further gains. However, the price saw a minor pullback on Friday due to profit-taking. The pullback may continue to test the broken resistance around 1.1600. The RSI has reached an oversold region, while the 20-day SMA is too distant from the current price, which may trigger a mean reversion.
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On the upside, the price may resume the bullish trend after a mild consolidation or pullback. The upside target is located at 1.1800, ahead of 1.2000. Any pullback in the pair seems corrective and appears to be a “buy on the dip” opportunity.
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