EUR/USD Weekly Forecast: A Comprehensive Analysis of Euro to Dollar Trends

Highlights

• The EUR/USD rallied 1.60% to $1.07277 in the week ending November 3.
• In the week ending November 10, the German economy, euro area services PMIs, and the ECB will be in focus.
• Fed Chair Powell and FOMC member speeches could also impact EUR/USD trends.

Weekly Overview of Week Ending November 03, 2023

In the week ending on November 3, the EUR/USD rallied 1.60%, ending the week at $1.07277. The EUR/USD fell to a Wednesday low of $1.05165 before surging to a Friday high of $1.07467.

The German Economy and Euro Area Services PMIs in Focus

On Monday, German factory orders and euro area services PMIs will draw investor attention. Weak factory orders could fuel fears of a prolonged German economic recession. Recent manufacturing PMI surveys revealed a weakening demand environment.

However, services PMIs could have more impact on buyer appetite for the EUR/USD. The services sector contributes over 70% to the euro area economy. Weaker-than-expected PMIs would signal a gloomy start to Q4.

According to the preliminary survey, the Eurozone Services PMI fell from 48.7 to 47.8. A downward revision to the preliminary PMI could weigh on the EUR/USD.

On Tuesday and Wednesday, the German economy is in the spotlight again. Industrial trend orders and finalized inflation numbers need consideration. A larger-than-expected fall in production and softer-than-prelim inflation figures may influence the demand for the EUR/USD.

The manufacturing sector contributes less than 30% to the German economy. However, further deterioration in sector activity would signal a more prolonged economic recession. Softer-than-expected inflation figures may ease pressure on the ECB to keep rates higher for longer. A less hawkish monetary policy outlook would weigh on buyer demand for the EUR/USD.

On Thursday, the ECB Economic Bulletin will garner investor interest. ECB guidance on the economic outlook, inflation, and monetary policy will be the focal points. On Thursday and Friday, ECB President Lagarde is on the calendar to speak, which also requires monitoring.

ECB Executive Board members Luis de Guindos (Mon/Thurs), Elizabeth McCaul (Tues), and Andrea Enria (Tues/Wed) are also on the calendar to speak. ECB Chief Economist Philip Lane will speak on Wednesday and Thursday.

Fed Chair Powell and the US Labor Market in Focus

The US labor market will be in focus on Thursday. Another marked increase in jobless claims would support the market bets on the Fed ending its rate hike cycle. Softer labor market conditions impact wage growth, disposable income, and consumer confidence.

A downward trend in disposable income and waning consumer confidence affect consumption and demand-driven inflation. A softer demand-driven inflation outlook eases pressure on the Fed to pursue a more hawkish rate path.

Economists forecast initial jobless claims to slip from 217k to 215k in the week ending November 4.

On Friday, US consumer confidence will be in the spotlight. The preliminary Michigan Consumer Sentiment Report could influence the appetite for the US dollar. An unexpected fall in consumer sentiment could signal a weak consumer demand outlook.

A weaker demand outlook eases the need for a hawkish Fed rate path. However, a weak demand outlook could fuel fears of a hard landing. Private consumption accounts for over 65% of the US economy.

Economists forecast the Michigan Consumer Sentiment Index to rise from 63.8 to 64.0. Beyond the headline figure, investors should consider the Expectations and Inflation components.

While the economic indicators will need consideration, investors must monitor Fed speeches. Fed Chair Powell is on the calendar to speak on Wednesday and Thursday. FOMC members Barkin, Barr, Bostic, Cook, Jeffrey, Logan, Waller, and Williams will also deliver speeches.

Short-Term Forecast:

Near-term trends for the EUR/USD hinge on central bank commentary and euro area economic indicators. However, cracks in US labor market conditions could have more impact on the EUR/USD pair. The markets consider the US economy to remain robust. Signals of a deteriorating US macroeconomic environment could impact the US dollar.

EUR/USD Price Action

Daily Chart

The EUR/USD sat above the 50-day EMA, while remaining below the 200-day EMA, sending bullish near-term but bearish longer-term price signals. A break above the 200-day EMA would support a move through the $1.07838 resistance level to target $1.08.

German economic indicators, central bank speeches, and the US labor market will be the focal points.

A dovish Fed and weaker-than-expected US stats would drive demand for the EUR/USD.

However, a drop below $1.07 would bring the 50-day EMA and the $1.06342 support level into play.

The 14-period Daily RSI at 61.45 indicates a EUR/USD break above the 200-day EMA before entering overbought territory.

4-Hour Chart

The EUR/USD sits above the 50-day and 200-day EMAs, sending bullish price signals. Significantly, the 50-day EMA narrowed to the 200-day EMA. A bullish cross of the 50-day EMA through the 200-day EMA could signal a near-term bearish trend reversal.

A EUR/USD return to $1.07500 would support a move to the $1.07838 resistance level to target $1.08.

However, a fall below $1.07 would bring the $1.06342 support level and the EMAs into play.

The 14-period 4-Hourly RSI at 68.68 shows the EUR/USD on the border of overbought territory. Selling pressure could intensify at the $1.07838 resistance level.