EUR/USD Weekly Forecast: Eurozone Economic Woes Deepen

• Tensions between Russia and Ukraine escalated this week as the two countries exchanged missiles.

• Traders worried about Trump’s tariff proposals.

• Eurozone business activity data revealed a sharp economic slowdown. 

The EUR/USD weekly forecast points South as traders fear a sharp decline in the Eurozone economy and looming ECB rate cuts.

Ups and downs of EUR/USD

The EUR/USD pair had a bearish week amid geopolitical and trade tensions and downbeat Eurozone economic data. Tensions between Russia and Ukraine escalated this week as the two countries exchanged missiles. Moreover, Russia threatened the use of nuclear power, raising fears of increasing tensions that would hurt the Eurozone economy. As a result, the euro plunged. 

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At the same time, traders worried about Trump’s tariff proposals that could reduce demand for European cars. Consequently, the economy might deteriorate, weighing on the euro. Finally, markets raised chances of a December ECB rate cut after Eurozone business activity data revealed a sharp economic slowdown. 

Next week’s key events for EUR/USD

Next week, the US will release reports, including the Fed minutes, GDP, and durable goods orders. The core durable goods orders and the GDP reports will show the health of the US economy. Upbeat numbers will show a resilient economy, reducing the likelihood of a rate cut in December. On the other hand, if the numbers come in poorer than expected, market participants will add on to bets for a December Fed rate cut.

Meanwhile, the FOMC meeting minutes will contain clues on future Fed policy moves. Since the meeting came after Trump won the US election, policymakers may have become more cautious. A cautious tone might lower the likelihood of another rate cut this year. 

EUR/USD weekly technical forecast: Bearish sentiment grows below 1.0500

On the technical side, the EUR/USD price has broken below the 1.0500 support level after a steep decline from the 22-SMA resistance. The price reversed to the downside after making a double top and breaking below the SMA. Bulls attempted to take control by breaking above the SMA. However, the price made a bearish engulfing candle that led to a rapid decline. 

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Meanwhile, the RSI shows robust bearish momentum, meaning the downtrend will likely continue next week. Therefore, bears might target the 1.0301 critical support level. The trend will only reverse when the price breaks above the 22-SMA resistance and the RSI starts trading above 50.

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