EUR/USD Weekly Forecast: US data builds on September rate cut

• Data on US manufacturing activity raised recession fears.

• US non-farm payrolls missed forecasts, showing a drop in demand.

• The dollar fell as interest rate cut expectations rose.

The EUR/USD weekly forecast is bullish as US data continues to support a rate cut at the September Fed meeting.

EUR/USD Ups and Downs

EUR/USD had an upbeat week but ended below its highs as investors reacted to a mix of US economic reports. As the week began, data on US manufacturing activity raised recession fears, boosting the dollar. However, the likelihood of a 50 bps rate cut has also increased.

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Meanwhile, employment data showed a weaker labor market with fewer job vacancies and slower private sector growth. At the same time, non-agricultural payrolls did not miss forecasts, showing a drop in demand. However, some positive reports, including business activity in the services sector, increased. Overall, the dollar fell as interest rate cut expectations rose.

Next week’s key events for EUR/USD

Next week, investors will focus on US inflation data. On Wednesday, the US will publish the consumer price index. The latest report showed cooling pressures on prices, approaching the 2% target. However, this time the Fed has shifted its focus to growth as inflation is already on a consistent downward trend.

Recent inflation reports have boosted confidence that high rates have eased price pressures. As a result, policymakers are likely to cut rates on Wednesday regardless of the outcome. However, a softer-than-expected report could convince them to vote for a 50 bps rate cut.

Otherwise, it will likely be a 25 bps rate cut. However, if there is an unexpected jump, it could affect policy moves after September. A less aggressive Fed could boost the dollar, pushing EUR/USD lower.

EUR/USD Weekly Technical Forecast: Price Breaks in Solid Support Zone

Technically, the EUR/USD price came back to retest the 22-SMA and 0.382 Fib level. However, the price stopped above these key support levels, showing that the bears are exhausted. Moreover, it indicates a possible continuation of the uptrend.

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As the price broke above the 1.0901 resistance, the upside momentum increased, pushing the price to the critical 1.1201 level. At the same time, the RSI entered the overbought region. Given the bullish trend, the price may soon break out of the SMA to make a higher high. Consequently, EUR/USD could decline above 1.1201 in the coming week.

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