EUR/USD Weekly Forecast: ECB Policy And Tapering Expectations Weigh On Pair

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• The pair will continue its downtrend in the long-term while keeping levels below a bearish 20-day SMA.
• The EUR/USD pair failed to surpass the 1.1900 level even after the disappointing unemployment report.
• The European Central Bank will reduce emergency bonds purchases in the next quarter while keeping its rates at the same level.

At the beginning of the week, traders’ expectations started to deteriorate without any major event behind this sentiment. The spread of the Delta variant may be the main reason behind the movement. In the middle of the week, the EUR/USD pair stopped its downtrend and closed over the 1.18100 level. The EUR/USD weekly forecast remains bearish, however the focus will remain on fundamental events from the Eurozone.

This is after the ECB decision to leave rates at the same level, as expected. However, after the meeting, Christine Lagarde maintained her opinion about inflation being due to temporal factors, which didn’t help the pair to rise.

On the other hand, The expectations about the Fed beginning the tapering were fueled by the comments made on Thursday by Fed Governor Michelle Bowman. Also, various Fed officials supported the plan to reduce bond purchasing by $120 billion.

Upcoming Events

For the next week, the indexes on inflation and core inflation rates will be released in the United States. For the core inflation rate, the forecast is 4.2%, which is below the previous month's reading of 4.3%. The inflation rate is forecast to be 5.3%. On the European side, the inflation rate will also be released by the end of the week.

EUR/USD Weekly Forecast – Daily Chart

EUR/USD Weekly Forecast: Technical Indicators Signal a Downtrend in the Long-Term

From a technical perspective, we can expect a downtrend. While the pair is below the 100- and 200-day SMA, it is still above the 20-day SMA on the daily chart. We can see the low interest in purchasing that the pair saw in some technical indicators.

All this indicates that the price will keep falling in the long run. However, if the pair experiences an uptrend, it will face a resistance level at 1.1908 which was the highest level reached in July, and beyond that, there is the psychological level of 1.2000.

EUR/USD Next Week Forecast

For the next week, we expect the bearish side to win and force the price to fall in the long-term. However, since there will be no major events on the European calendar, the direction of the movement will depend mostly on the US side of things.