- The dollar recovered after massive losses the previous week.
- Investors expect one last Fed rate hike next week.
- The euro fell as Eurozone inflation eased, reducing ECB rate hike expectations.
The EUR/USD weekly forecast is slightly bearish as investors await a Fed rate hike, supporting the dollar.
Ups and downs of EUR/USD
EUR/USD had a bearish week as the dollar recovered and the euro fell. The dollar recovered after massive losses the previous week due to easing inflation. Moreover, the recovery came ahead of a Fed rate hike and signs of a still-tight US labor market.
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Notably, investors expect one last Fed rate hike next week. However, gains in the dollar were capped amid expectations of an end to the rate hike cycle.
Conversely, the euro fell as Eurozone inflation eased, reducing ECB rate hike expectations. This also means a less aggressive ECB.
Next week’s key events for EUR/USD
There will be several critical economic releases from the US and the Eurozone next week. However, investor focus will be on the FOMC policy meeting. Investors widely expect the central bank to increase rates by 25 basis points during its July 26 meeting.
However, policymakers may show greater confidence in inflation cooling down, removing the Fed’s need to raise borrowing costs significantly in the future. Therefore, although the hike might support the dollar, the message after the meeting could have the opposite effect.
EUR/USD weekly technical forecast: Bears retest the 1.1105 level as support.
The bias for EUR/USD on the daily chart is bullish because the price trades above the 22-SMA with the RSI above 50. However, there has been a retracement to the 1.1105 support level. Bears resurfaced when the price got overbought, with the RSI above 70.
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However, the price made a higher high, confirming a bullish trend. Therefore, the retracement will likely make a higher low before bulls return to seek a new high. There is a chance the price will reverse at the 1.1105 support.
Still, bears might retest lower support levels at 1.1005 or the 22-SMA before the uptrend continues. When bulls return, they will look to retest and likely break above the 1.1303 resistance. This would mean a higher high and continuation of the uptrend. The trend will, however, change if bears break below the 22-SMA.
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