Weekly Forex Forecast: EUR/USD, USD/CAD, and S&P 500 – October 5, 2025
By Adam Lemon (Credit: DailyForex.com)
This week’s forex outlook focuses on the EUR/USD and USD/CAD currency pairs, as well as the S&P 500 Index. These markets are poised for continued volatility amid shifting interest rates, global economic data, and geopolitical influences. The technical picture combines longer-term trends with shorter-term momentum, serving as a foundation for potential trading decisions for the upcoming week starting October 5, 2025.
This analysis combines fundamental inputs with technical chart patterns to anticipate the next directional moves across these key assets. While no forecast can guarantee outcomes, this thematic overview seeks to provide traders and investors with directional clarity and potential price levels to monitor during the week.
Market Overview
– Last week concluded with continued strength in the U.S. dollar, with the currency index hovering near multi-month highs.
– Key economic data from the U.S., including labor market reports and manufacturing indices, reinforced the perception of a sturdy American economy.
– Central bank rate policy remains a primary driver of market sentiment, particularly with expectations that the Federal Reserve will hold rates higher for longer.
– Weakness in European and Canadian economic data has created divergent trends that support the USD against other major currencies.
– Stock markets remain volatile and continue to correct from their previous summer highs amid investor concerns about high interest rates and slowing global growth.
Given this backdrop, traders should stay alert to evolving macroeconomic updates, central bank rate statements, and potential surprises in inflation or job growth metrics throughout the week.
EUR/USD Technical and Fundamental Outlook
The EUR/USD currency pair has displayed a sustained bearish tone over recent weeks, driven by interest rate divergence between the Federal Reserve and the European Central Bank. The euro has failed to gain momentum despite weaker U.S. data points, signaling a robust dollar demand overall.
Fundamental Factors:
– The ECB recently paused rate hikes amid deteriorating growth metrics in the Eurozone, weakening the euro’s attractiveness.
– Euro area inflation has started to decline, reducing the probability of further ECB policy tightening.
– In contrast, the U.S. economy has demonstrated resilience, particularly in employment data, which has allowed the Fed to maintain a hawkish stance.
Technical Indicators:
– The EUR/USD has consistently posted lower highs and lower lows, a hallmark of a bearish trend.
– Resistance is observed near the 1.0600 level, corresponding to previous support that was broken late September.
– Support lies around the 1.0450 handle, and a clean break below this could open the door to 1.0350 or even 1.0200 in the medium term.
– 50-period and 200-period moving averages on the daily chart remain above price, reinforcing downward bias.
– RSI near 35 suggests downside momentum is present but not yet in deeply oversold territory, allowing further room for decline.
Trading Ideas for EUR/USD:
– Bearish bias remains dominant while below 1.0600.
– Short-side entries could target 1.0450 and then 1.0350 as next significant support zones.
– Upside invalidation of bearish thesis only occurs with a close above 1.0630 on strong volume.
USD/CAD Technical and Fundamental Outlook
The USD/CAD currency pair is benefiting from both USD strength and weaker sentiment around the Canadian economy. Canada’s economic data continues to underperform, and declining oil prices—often a support for the Canadian dollar—have added further pressure.
Fundamental Factors:
– The Bank of Canada has signaled greater caution near term, citing weaker GDP growth and declining employment.
– West Texas Intermediate (WTI) crude oil has cooled from recent highs, which weighs on the Canadian dollar.
– U.S. economic resilience is keeping the greenback broadly firm, building a bullish foundation for USD/CAD.
Technical Indicators:
– USD/CAD is approaching the psychological level of 1.380
Read more on EUR/USD trading.