US Dollar Forecast: EUR/USD Pulls Back Ahead of August High

US Dollar Forecast: EUR/USD

EUR/USD pulls back ahead of the August high (1.1743) to register a fresh weekly low (1.1613), but the weakness in the exchange rate may turn out to be temporary should it continue to track the positive slope in the 50-Day SMA (1.1665).

US Dollar Forecast: EUR/USD Pulls Back Ahead of August High

EUR/USD fails to retain the advance from the start of the week even though the Euro Area’s Consumer Price Index (CPI) shows the core reading for inflation holding steady at 2.3% in August, and a pickup in market participation may lead to increased volatility in the exchange rate as US traders return from a holiday weekend.

US Economic Calendar

At the same time, data prints coming out of the US may sway foreign exchange markets as Federal Reserve Chairman Jerome Powell warns that ‘the shifting balance of risks may warrant adjusting our policy stance,’ but the US Non-Farm Payrolls (NFP) report may encourage the Fed to further combat inflation as the economy is expected to add 75K jobs in August.

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In turn, a further expansion in employment may generate a bullish reaction in the Greenback as it raises the Federal Open Market Committee’s (FOMC) scope to keep US interest rates higher for longer, but a weaker-than-expected NFP report may curb the recent decline in EUR/USD as it fuels speculation for a Fed rate cut.

With that said, EUR/USD may stage further attempts to test the August high (1.1743) as the FOMC appears to be on course to further unwind its restrictive policy, but the exchange rate may reestablish the bullish trend from earlier this year as the 50-Day SMA (1.1665) continues to reflect a positive slope.

EUR/USD Chart – Daily

Chart Prepared by David Song, Senior Strategist; EUR/USD on TradingView

EUR/USD pulls back ahead of the August high (1.1743) to snap the series of higher highs and lows from last week, and a move/close above 1.1560 (100% Fibonacci extension) may push the exchange rate toward the August low (1.1392).
Failure to hold above the 1.1390 (78/6% Fibonacci extension) to 1.1440 (61.8% Fibonacci extension) region may lead to a test of the June low (1.1347), with the next area of interest coming in around 1.1260 (61.8% Fibonacci extension) to 1.1280 (61.8% Fibonacci retracement).
Need a move/close above the 1.1690 (78.6% Fibonacci extension) to 1.1750 (78.6% Fibonacci retracement) zone to bring the July high (1.1830) on the radar, with the next region of interest coming in around the September 2021 high (1.1909).

Additional Market Outlooks

Canadian Dollar Forecast: USD/CAD Eyes Monthly Low Ahead of US PCE

Australian Dollar Forecast: AUD/USD Defends Rebound from Monthly Low

Gold Price Bounces Back Ahead of August Low

GBP/USD Defends Fed Symposium Rally

--- Written by David Song, Senior Strategist

Follow on Twitter at @DavidJSong

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