EUR/USD Weekly Forecast: Upbeat NFP Pours Water on Fed’s Cut

• US manufacturing activity improved while services activity declined.

• The US jobs report showed a bigger-than-expected increase in employment in March.

• Traders scaled back expectations for the first Fed cut in June.

The EUR/USD weekly forecast leans toward the bearish side as investors adjust their expectations on Fed rate cuts following a buoyant jobs report.

Ups and downs of EUR/USD

Last week, EUR/USD fluctuated but ended with gains after a series of economic reports from the US. Investors mainly focused on employment and PMI data, which showed a mixed picture of the economy. Manufacturing activity improved while services activity declined. Meanwhile, unemployment claims rose, while the NFP report beat forecasts. 

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Initially, the services and jobless claims reports increased rate cut expectations, leading to a rally in the EUR/USD pair. However, the week ended with a blockbuster US jobs report showing a bigger-than-expected increase in employment in March. At the same time, the unemployment rate fell, revealing a still-tight labor market. Consequently, traders scaled back expectations for the first Fed cut in June.

Next week’s key events for EUR/USD

The US consumer and producer price indices will show the country’s inflation state. This insight will shape the Fed’s rate cut outlook. Economists expect the CPI to drop from 0.4% to 0.3%. A decline in inflation would support expectations that the Fed will cut interest rates in June. However, there is also a chance that the figure will beat forecasts. This would lead to declining rate cut expectations, especially after the upbeat jobs report. 

Meanwhile, traders will also look at the FOMC meeting minutes, which might contain clues on the outlook for interest rates.

EUR/USD weekly technical forecast: Price retreats as 22-SMA resistance holds strong

On the technical side, the EUR/USD price is declining after finding strong resistance at the 22-SMA. Moreover, the price trades with the nearest support at 1.3200 and the nearest resistance at 1.3800. 

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The bullish trend recently reversed when the price started trading below the 22-SMA  and the RSI below 50. Bulls tried to take back control at one point but failed to push above the 1.0950 key resistance level. This allowed bears to push the price back below the 22-SMA before retesting it as resistance.

And now, bears are targeting the 1.0700 support. A break below this level would confirm a continuation of the downtrend. Moreover, the price would be free to retest lower support levels like 1.0500.

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