With the US government re-opening we are starting to see the flow of data, but question marks remain about the December rate decision. Fed's Williams last week said that the downside risks to employment have increased and that he’s open to near-term rate cut. UoM Consumer Expectations hit a record low. But thanks to a largely risk off mode, the EUR/USD remain downbeat. Looking ahead to the week ahead, the key data releases include PPI and retail sales from the US. If these also disappoint then this should boost the odds of a December cut further and limit the downside risks for the EUR/USD forecast. Still, a lot will depend on risk direction. A struggling equity markets could support the dollar undermine the more risk sensitive euro.
Economic releases that could shape EUR/USD forecast this week
It’s shaping up to be a slightly busier week for Eurozone data. On Monday, we’ll get the German Ifo business climate index, which is expected to remain largely unchanged. ECB President Lagarde is also scheduled to speak the same day. From the U.S. side, Monday is relatively quiet.
Things pick up on Tuesday with U.S. retail sales, PPI, pending home sales, the Richmond manufacturing index, and CB consumer confidence all on the calendar.
On Wednesday, the U.S. will release jobless claims, durable goods orders, and GDP figures. We’ll also get the core PCE price index — the Fed’s preferred inflation gauge — along with a few other indicators.
Thursday brings a U.S. bank holiday, and markets will see shorter, irregular trading hours on Friday. Still, Friday includes notable Eurozone releases, including German CPI and several other regional indicators that could impact the EUR/USD forecast.
Technical EUR/USD forecast
From a technical perspective, the EUR/USD forecast has turned more negative. The pair failed to show any meaningful upside follow-through after breaking out of what was essentially a bearish flag pattern — a structure that has been in place since rates peaked in September. The absence of continuation suggests that bullish traders may have been caught out, anticipating further gains that never materialised.
Source: TradingView.com
The EUR/USD pair is now hovering around the 1.1500 area, which remains an important support zone. A decisive breakdown below this region could expose several downside levels that could come into view. The first notable target is the August low at 1.1391. Below that, there’s a wider support band between 1.1214 and 1.1275, representing highs from previous years. These areas could be tested if momentum continues to shift lower.
On the upside, 1.1600 now stands out as a key resistance level should the market attempt a rebound.
As well as the above mentioned data release, much of the direction will hinge on broader risk sentiment. If equity markets weaken, the positively correlating EUR/USD could weaken in tandem.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
