- The European Central Bank has suspended its aggressive monetary tightening policy.
- The U.S. economy expanded nearly 5% in the third quarter.
- Futures markets are almost certain that the Fed will not raise interest rates in November.
There is a clear bearish wind in the EUR/USD weekly forecast due to the ECB’s recent decision to put the brakes on its interest rate hike campaign.
EUR/USD up/down
EUR/USD had a bearish week as the European Central Bank suspended its aggressive monetary tightening. Meanwhile, rising tensions in the Middle East and favorable economic indicators supported the dollar.
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The ECB is raising interest rates by 4.5 percentage points from July 2022 to combat soaring inflation. But last month it pledged to halt further rate hikes. The decision comes as record borrowing costs begin to impact the economy.
Elsewhere, the U.S. economy expanded nearly 5% in the third quarter. This growth was driven by rising wages due to a tight labor market.
Major events for EUR/USD next week
Next week will be a turbulent one for EUR/USD as the Federal Reserve holds its monetary policy meeting. In addition, the US is scheduled to release data on employment.
Futures markets are almost certain that the Fed will not raise interest rates in November. Furthermore, there is an 80% chance that interest rates will be stable in December, according to CME’s FedWatch tool. Policymakers plan to keep the current key interest rate in place until most of 2024, which is longer than markets expected.
Meanwhile, employment data may continue to indicate a strong labor market.
EUR/USD Weekly Technical Forecast: Bulls rebound to reverse trend.
EUR/USD price rose above the 22-SMA on the daily chart. This move indicates that the bulls are trying to reverse the trend. However, the RSI is still in bearish territory below 50, indicating that the bears are still strong.
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The price found strong resistance at the key level of 1.0700, where the price paused and fell to retest the 22-SMA. If the SMA holds firm as support, the price could rise next week and retest to remove the resistance at 1.0700.
However, if the bears remain strong as seen on the RSI, the price could fall below the SMA and key support level at 1.0500. Such a move would lead to lower lows, indicating a continuation of the downtrend.
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