• Most Fed policymakers agreed to lower borrowing costs by 50-bps.

• The US Consumer Price Index rose by 2.4% annually, above estimates.

• Markets lowered the chances of a November Fed rate cut.

The EUR/USD weekly forecast is bearish due to a continuing shift to a more cautious outlook for Fed policy after hotter CPI data.

Ups and downs of EUR/USD

EUR/USD had a bearish week, with the dollar gaining as Fed rate cut expectations eased. Market participants absorbed data on inflation and employment. Furthermore, the FOMC meeting minutes showed that most policymakers agreed to lower borrowing costs by 50-bps.

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The Consumer Price Index rose by 2.4% annually, above estimates for a 0.1% increase. Consequently, markets lowered the chances of a November Fed rate cut. Meanwhile, unemployment claims rose more than expected, showing some weakness in the labor market.

As the week ended, wholesale inflation data came in lower than expected, weakening the dollar slightly.

Next week’s key events for EUR/USD

Next week will be slow for EUR/USD in terms of economic news, with the ECB bank lending survey and the US retail sales report. Market participants will focus on the US retail sales report, which will show the state of consumer spending and give clues on the Fed’s next policy move. Recent economic data from the US has shown resilience.

As a result, market participants have slashed bets for a 25-bps November Fed rate cut. Moreover, there is a chance the Fed will keep interest rates unchanged. IF sales jump, rate-cut bets will keep falling, boosting the greenback. On the other hand, if sales significantly miss forecasts, there would be more pressure on the Fed to lower borrowing costs.

EUR/USD weekly technical forecast: Price reverses after double top

On the technical side, the EUR/USD price has broken below a major bullish trendline. At the same time, the price trades well below the 22-SMA, showing bears are in the lead. Meanwhile, the RSI is heading for the oversold region, indicating solid bearish momentum.

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The price made a double top pattern near the 1.1202 resistance level. Moreover, the RSI made a bearish divergence to show weaker bullish momentum. As a result, bears pushed the price below the 22-SMA, the 1.1000 level, and the bullish trendline. The move has pushed the price to a lower low, confirming a downtrend. Therefore, EUR/USD might drop to the 1.0801 support level next week.

https://www.forexcrunch.com/blog/2024/10/12/eur-usd-weekly-forecast-fed-takes-more-conservative-stance/