EUR/USD Weekly Forecast: Fed poised for September tapering amid weak CPI

• The US PPI and CPI reports confirmed that inflation was on a consistent path towards the 2% target.

• US retail sales rose and jobless claims fell.

• Next week, investors will scrutinize the minutes of the Fed and ECB policy meetings.

The EUR/USD weekly forecast shows solid bullish momentum as US inflation data suggests a Fed rate cut at the September meeting.

EUR/USD Ups and Downs

The EUR/USD pair ended the week higher as the euro rallied amid dollar weakness. The dollar had a tough week as the data raised the likelihood of a 25 basis point Fed rate cut in September. The US PPI and CPI reports confirmed that inflation was on a consistent path towards the 2% target. Therefore, traders are more confident that the Fed will start lowering borrowing costs. This view kept pressure on the US dollar, boosting the euro.

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Meanwhile, the economy presented a mixed picture. Last week, there were recession fears. However, retail sales rose this week and jobless claims fell, pointing to a resilient economy.

Next week’s key events for EUR/USD

Next week, investors will be looking at the minutes of the European Central Bank and Federal Reserve policy meetings. Additionally, Fed Chairman Powell will speak at the Jackson Hole Symposium. The minutes of the policy meeting will contain clues about the prospects for ECB and Fed rate cuts.

While the ECB has started to reduce borrowing costs, markets are expecting the Fed’s first rate cut in September. Similarly, economists expect the next ECB rate cut to take place in September. However, inflation in the Eurozone has stalled, while inflation in the US is easing. Therefore, there is a good chance that the Fed’s policymakers will be more assertive than the ECB officials.

When Powell speaks next week, he could hint at the future, which could make the US dollar very volatile.

EUR/USD Weekly Technical Forecast: Bulls Retest Uptrend Channel Support

Technically, the EUR/USD price is trading in a bullish channel and has retested the channel resistance. Moreover, it is trading above the 22-SMA, the RSI is almost overbought, supporting a bullish trend. Bulls suddenly moved from 1.0800 support to channel resistance.

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Price could drop back to the 22-SMA or channel support line here. However, the next target is at the 1.1051 level as the direction is up. The uptrend will continue as long as the price continues to create highs and lows.

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