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The EUR/USD weekly forecast remains subdued under 1.1700, extending the retreat from the September peak of 1.1920 as the US dollar gained strength from a round of upbeat economic data and cautious Fed remarks.

The Fed Chair Powell emphasized the need for a balanced approach to rate cuts, warning against the risks of reigniting inflation. While the comments didn’t trigger an immediate reaction, the dollar found strength during midweek as markets reassessed the Fed’s easing pace. The move was further reinforced by the better-than-expected US GDP for Q2, revised higher to 3.8% year-over-year. Durable goods orders surged to 2.9% in August, while jobless claims fell 14k, all underscoring the US economic resilience. Friday’s Core PCE inflation met the forecast at 2.9% y/y, providing no surprise to the markets but keeping intact the Fed’s cautious rhetoric.

From the Eurozone, the PMI figures revealed a mixed scenario, as the manufacturing sector contracted in September, slightly offset by growth in the services sector, leaving the composite PMI at 51.2. A modest expansion could do little to lift the euro, especially in the backdrop of a stronger dollar.

EUR/USD Key Events Next Week

Looking ahead, the focus remains on the data with the following major events:

• Germany Retail Sales (Tuesday)
• HICP Inflation y/y (Tuesday)
• Germany Unemployment
• Chicago PMI (Tuesday)
• JOLTs Job Opening (Tuesday)
• US ADP Employment Change (Wednesday)
• US Jobless Claims (Thursday)
• US NFP (Friday)

The primary focus will remain on the US labor market, as the Fed remains concerned about safeguarding it from further softening. Meanwhile, German data is also key to watch as the Eurozone’s growth concerns are mounting. Moreover, central bank speeches may further provide impetus to the market.

With the dollar in firm control and data risks skewed toward US outperformance, EUR/USD may struggle to regain momentum in the near term. The euro’s fate this week will hinge on whether inflation and employment data on both sides of the Atlantic can shift the policy narrative.

EUR/USD Weekly Technical Forecast: Lacking Direction at 1.1700

(Click on image to enlarge)

EUR/USD daily chart

The EUR/USD daily chart shows a broken rising channel, with price moving below the 20-day MA. Although a mild recovery was seen from multi-week lows by the 50-day MA, the euro is still not out of the woods. The next significant support emerges at a swing low and 100-day MA near 1.1575.

However, a sustained breakout below the 50-day MA could initiate a strong bearish trend, with a probability of testing the 31st July lows of 1.1400 ahead of the 200-day MA and a swing low near 1.1150. On the other hand, the price could rise above 1.1700, reaching 1.1800 and potentially surpassing yearly highs of 1.1920, with an ultimate target of 1.2000.

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