Based on the article “EUR/USD Weekly Forecast: Fast Results and Shifting Speculative Winds” by Justin Low, originally published on Forex Factory, the following is a rewritten and expanded version of the article. This version retains the core ideas and forecast insights for EUR/USD, enriched with analysis to reach the required 1000-word count.
Credit: Original article by Justin Low, available at Forex Factory.
EUR/USD Weekly Forecast: Swift Reactions to Data and Evolving Speculative Trends
The EUR/USD pair has experienced a noticeable momentum shift over the past week, indicating significant market reactions to economic data releases and shifts in trader sentiment. As financial markets digest rapid-fire information and central bank narratives, the currency pair is adjusting in real-time to these pressures. The past trading week saw the euro’s progress stalled by a combination of improved US economic data and heightened expectations for future Federal Reserve actions.
Market Overview and Key Movements
– The EUR/USD rose earlier in the week but eventually reversed, driven primarily by the release of key US economic indicators.
– The pair climbed to just below the 1.0900 mark before being dragged down towards the 1.0800 zone as market sentiment pivoted.
– This movement resulted in the euro giving back most of its weekly gains, providing traders with a stark reminder of how quickly the market can shift in response to strong data sets.
Key Market Drivers Influencing the Pair
Several important events and data points influenced the trajectory of EUR/USD throughout the week. These include:
1. US Economic Data Strength
– Robust US jobless claims figures and Services PMI data signaled continued strength in the broader US economy.
– ISM Services PMI showed surprising resilience, adding upward pressure on the US dollar.
– Weekly jobless claims fell back close to pre-pandemic norms, reinforcing confidence in the labor market.
– The strength of recent US data was enough to push expectations for a Federal Reserve interest rate reduction further out into the future.
2. Federal Reserve Policy Expectations
– Markets are recalibrating expectations for the number and timing of rate cuts in 2024.
– As Chair Jerome Powell has consistently emphasized a data-dependent approach, strong economic readings have led traders to price in fewer rate cuts this year than originally forecast.
– Fed funds futures suggested traders are now anticipating one or two potential cuts instead of the previously expected three or four over the course of the year.
– This shift in outlook naturally increases the appeal of the US dollar over the euro in the near term.
3. European Central Bank (ECB) Divergence
– The ECB has taken a slightly more dovish tone compared to the Federal Reserve.
– With eurozone inflation easing and growth indicators remaining mixed, the ECB is more likely to ease monetary policy than the Fed.
– Expectations for a June rate cut from the ECB remain firmly on the table, with some policymakers hinting at additional easing depending on inflation trajectories.
Technical Analysis Points to Increased Volatility
The technical structure of the EUR/USD pair has also contributed to current market dynamics.
– Resistance Levels:
– The 1.0900 zone remains a significant psychological barrier.
– Price action attempted a breakout but failed to sustain gains above this level.
– Support Levels:
– The 1.0800 and 1.0780 thresholds acted as key short-term support during the retreat.
– A break below 1.0780 may expose downside targets near 1.0730 and 1.0700.
– Moving Averages:
– The 100-day and 200-day moving averages are providing dynamic support and resistance.
– The flattening of the 50-day moving average signals a potential consolidation phase ahead if neither bulls nor bears assert dominance.
– RSI and Momentum Indicators:
– Relative Strength Index (RSI) has retreated from overbought territory, suggesting cooling bullish momentum.
– Momentum oscillators now lean neutral, indicating a possible
Explore this further here: USD/JPY trading.