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EUR/USD weekly forecast: Risk events to decide the path

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  • The EUR/USD ended the week in red despite a relief rally. 
  • The US NFP helped the EUR/USD pair to rise from the 1.1800 handle. 
  • Fed’s hawkish stance and delta variant fears are weighing on the pair. 
  • The overall trend is neutral for now and next week risk events can provide fresh impetus. 

The first half of 2021 ended this week with an overall US Dollar dominance and a weaker Euro. The coming week brings updates from central banks, some key data and growing concerns about a new coronavirus variant.

EUR/USD and NFP reaction

It seems like the entire objective of the NFP release was to initiate a correction in the Dollar rally. The data revealed modest wage growth at 3.6% while 850,000 news jobs were added to the economy. However, the upbeat data wasn’t adequate to keep the Greenback bulls alive.

The long weekend ahead also pushed traders to liquidate their positions. Nonetheless, the EUR/USD pair closed the week in red despite a relief rally.

Hawkish Fed

It looks like the hawkish camp is growing. Christopher Waller (Fed Governor) reinforced to curtail monetary policy support for economic recovery. It means that FOMC can cut the bond-buying program sooner than expected.

Delta virus fears

The Delta variant of coronavirus is rapidly spreading across Europe through Britain. Although the Europeans are getting vaccinated quickly, the surge in new cases keeps pressure on the Euro. The virus fears can hurt the European summers and may hinder the reopening of the economy.

Eurozone data and ECB

Poor Eurozone inflation data also weighed on the Euro. Headline CPI dropped to 1.9% y/y while core CPI fell to 0.9%.

The economic calendar shows final services PMIs and ECB meetings that can provide fresh impetus to the market.

What’s next for EUR/USD?

Services PMIs and German ZEW Business Climate data are significant events for the next week. However, the most significant is ECB strategic meeting on Thursday.

On the other hand, US ISM and Fed meeting minutes are due next week. Overall, these events can negatively impact the EUR/USD.

EUR/USD technical weekly forecast

The EUR/USD price fell below the 200-day SMA last month and made a failed attempt to surpass above it. Friday’s bullish bar shows signs of bottom reversal with adequate volume. The probability of kissing the 200-day SMA (1.1930) next week is quite high. Moving above, 20-day SMA (1.1992) and 50-day SMA (1.2025) can be the potential targets and resistance zones. On the flip side, the pair may test Friday lows around 1.1800 ahead of 1.1770 and then 1.1740.

4-hour chart of EUR/USD

4-hour chart of EUR/USD

However, it is not clear yet which could be the path of least resistance for the pair. Therefore, the technical neutral stance for the pair will primarily be impacted by the key risk events next week.

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