- The dollar fell as expectations for an interest rate hike in December faded.
- U.S. retail sales increased, but new jobless claims fell, indicating a strong economy.
- Economists agree that the European Central Bank’s rate hike cycle is over.
The weekly EUR/USD forecast shows the euro holding a slight edge against the dollar as markets adjust expectations for Fed policy decisions. Recent economic data and comments from Fed officials have reduced the likelihood of a December interest rate hike, making the dollar less attractive.
EUR/USD up/down
EUR/USD had a bullish week as the dollar weakened despite upbeat US data. Notably, the dollar weakened as bets on a rate hike in December tapered off. Fed Chairman Jerome Powell has suggested that higher market interest rates may reduce the need for further policy tightening.
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As a result, the chance that the Fed will raise rates in December has dropped from 39% to 24%. Furthermore, it is considered almost certain that a suspension will take place in November.
Meanwhile, U.S. retail sales increased, but the number of new unemployment insurance claims fell, indicating a strong economy.
Major events for EUR/USD next week
Investors are looking forward to next week’s ECB policy meeting, which is likely to lead to more volatility in EUR/USD. Additionally, they are expecting data on GDP and core durable goods orders from the US.
All economists surveyed by Reuters agree that the European Central Bank’s rate hike cycle is over. Therefore, the bank is likely to keep interest rates unchanged next week. However, the central bank will not begin monetary easing until at least July 2024.
The ECB raised its key interest rate by 25 basis points in September. Nevertheless, it indicated that this 10th rate hike in 14 consecutive months is likely to be the last. French central bank governor François Villeroy de Galault reiterated last week that the ECB should keep key interest rates at current levels.
EUR/USD Weekly Technical Forecast: Bulls locked in battle for leadership at 22-SMA.
EUR/USD bulls are fighting for control at the 22-SMA resistance. However, prices are trending downward. It has consistently lowered its lows and highs, and the RSI remains below 50, supporting bearish momentum. Therefore, with strong resistance from the 22-SMA and 1.0625 levels, it will be difficult for the bulls to take control.
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Still, if the pair breaks above this resistance zone, sentiment will move to the next target at 1.0800. If the resistance zone holds, the price will test again and the downtrend could continue below the 1.0451 support level.
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