- The eurozone is at risk of recession amid rising costs of gas.
- The US created 315,000 new jobs in August.
- The ECB will raise rates next week by either 50 or 75 bps.
The EUR/USD weekly forecast is bearish as the energy crisis in Europe will likely cause recessions in many Eurozone countries, starting with Germany.
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Ups and downs of EUR/USD
EUR/USD closed the week lower after a slew of positive economic data from the US amid an energy crisis and sky-high inflation in Europe. Consumer confidence in the US went up according to data released on Tuesday. On Wednesday, markets were surprised by the eurozone inflation, which hit 9.1%, higher than the 9.0% forecast.
The pace of hiring in the US increased more than anticipated in August. Still, wage growth slowed, and unemployment rose, giving the Federal Reserve some leeway when raising interest rates later this month. As a result, the dollar weakened from a 20-year high on Friday.
According to data, the U.S. economy created 315,000 new jobs in August, exceeding the economists’ average estimate of 300,000 jobs.
Next week’s key events for EUR/USD
Despite skyrocketing inflation, the ECB was late to the rate-setting cycle compared to its peers. The euro is under pressure from lagging and is currently trading below parity with the US currency.
But with the likelihood of a recession within a year rising to a median of 60% from 45% in a July poll, the ECB is now faced with the prospect of quickly hiking rates as the economy is almost likely entering one.
The European Central Bank’s policymakers have emphasized the need for prompt and decisive action to fight inflation, and they made it clear that the range for the decision at the policy meeting next week will be between 50 and 75 basis points.
EUR/USD weekly technical forecast: Bullish RSI divergence
The daily chart shows the price trading below the 22-SMA and RSI below 50, showing bears are in charge. However, we see there is solid support at 0.99236. At the same time, the RSI is showing weakness in the bears as there is a bullish divergence.
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If bears cannot break below the 0.99236 support level, we might see bulls return to retest the 22-SMA level and possibly break above. If bulls take over, the price might retest 1.03406.
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