EUR/USD Weekly Forecast: ECB, Fed to Drive Markets

• The US labor market is still showing strength.
• US producer prices increased somewhat more than anticipated in November.
• Investors are expecting rate hikes from the ECB and the Fed.

The EUR/USD weekly forecast is slightly bearish as data from the US is still pointing to a strong economy. This could affect the Fed’s policy outlook.

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Ups and downs of EUR/USD

The past week was mostly quiet for EUR/USD as the economic calendar was light. Investors paid attention to data from the US, including the initial jobless claims and the producer price index.

The number of Americans submitting new claims for unemployment benefits grew slightly, indicating that the labor market is still tight and robust.

US producer prices increased somewhat more than anticipated in November. However, the trend is moderating, as annual inflation at the factory gate recorded its smallest increase in 1-1/2 years.

The Labor Department’s data on Friday also revealed that, on an annual basis, underlying producer prices have been rising at their slowest rate since April 2021.

Next week’s key events for EUR/USD

Next week will be packed with significant news releases from the eurozone and the US. However, investors will pay more attention to the inflation readings and central bank meetings.

The inflation data from the US will come before the Fed meeting, while eurozone inflation will come out after the ECB meeting. These will cause a lot of volatility for the EUR/USD.

Both the ECB and the Fed will meet next week and raise rates to curb inflation. This will likely cause some volatility, especially if there are surprises. Investors are expecting hikes of 50bps from both central banks.

EUR/USD weekly technical forecast: Weakness at the 1.0602 resistance

The daily chart shows the price making, consistently higher highs, and higher lows. It is also trading above the 22-SMA showing a bullish trend. The RSI also supports buyers as it trades above 50.

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Buyers have pushed off the 1.0225 support level to the 1.0602 resistance. However, the move was shallow, with many pullbacks. This is a sign of weakness.

The RSI has also made a slightly bearish divergence with the price, a sign that buyers are not as strong as they previously were. This might allow sellers to come in and break below the 22-SMA. If this happens, the price will fall to the 1.0225 support.

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