EUR/USD forecast ahead of US NFP and Fed decision

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The EUR/USD price declined sharply on Friday as investors reflected on the European Central Bank (ECB) decision, weak US GDP growth, and surging inflation. The pair is trading at 1.1553, which is lower than last week’s high of 1.1590.

Fed decision and US NFP

The biggest catalyst for the EUR/USD pair last week was the latest interest rate decision by the European Central Bank (ECB). The bank decided to leave interest rates unchanged as most analysts were expecting. 

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At the same time, the ECB decided to start lowering its asset purchases as it seeks to abandon its easy-money policies. Still, Christine Lagarde insisted that the bank was not about to hike interest rates.

The ECB decision was followed by the relatively weak US GDP data. The numbers showed that the Delta variant and the supply challenges led to a sharp slowdown of the economy. Precisely, the data showed that the country’s economy declined by 2.0% in the third quarter. This was a sharp decline from the previous 5.7%.

Meanwhile, the US Personal Consumer Expenditure (PCE) data showed that the country’s inflation remained at the highest level in more than 30 years. 

Therefore, the EUR/USD will react to the latest interest rate decision by the Federal Reserve that will come out on Wednesday. 

Analysts expect the data to show that the central bank will maintain its interest rate unchanged between 0% and 0.25%. The bank will also likely point that it will start hiking interest rates earlier than in the previous decision.

The bank is also expected to start tapering its asset purchases program as the country’s economy continues to recover. According to the Wall Street Journal (WSJ), the bank will taper by about $15 billion per month. The EUR/USD will also react to the latest US jobs data.

EUR/USD forecast


The hourly chart shows that the EUR/USD pair crashed hard on Friday after the strong US PCE data. The pair declined to a low of 1.1535, which was substantially lower than Friday’s high of 1.1692. It moved below the key support level at 1.1585 and the 25-day and 50-day moving averages. 

Therefore, the EUR/USD pair will likely remain being under pressure as bears attempt to move below 1.1500. Besides, it seems to be forming a bearish pennant pattern. On the flip side, a move above the key resistance at 1.1570 will invalidate this view.

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