Stop The Fall, Dollar Bulls Have Returned is the weekly forecast for EUR/USD.

The EUR/USD pair maintained its advance throughout the first part of the week, but failed spectacularly at parity, closing the week at approximately 0.9750 and incurring a slight weekly loss.

At the beginning of the fourth quarter, optimism reigned supreme, as Wall Street reported massive gains and government bonds extended their gains from the previous week.

The EUR/USD is supported by appetite for risk.

The increasing likelihood of a global recession, according to market participants, would prompt central banks to reduce the rate of quantitative easing sooner rather than later.

The Reserve Bank of Australia raised the cash rate by 25 basis points, which was less than anticipated, fueling speculation and demand for high-yielding assets.

But the positive feelings did not last long. The value of the common currency began to decline on Wednesday, when the EU proposed additional sanctions against Russia for its invasion of Ukraine in February.

Following the illegal annexation of Donetsk, Luhansk, Kherson, and Zaporizhzhia, sanctions were imposed, including a price ceiling on Russian oil and restrictions on imports and exports from and to the nation.

The European Union is presently in peril.

Moreover, sluggish EU statistics reignited fears of a Union economic downturn, dampening the risk-taking disposition. The revised September PMIs from S&P Global indicate a steeper decline in the business sector.

Similarly, wholesale inflation in the EU increased by 43.3% year-over-year in August, while retail sales in the same month fell by 0.3% and German sales fell by 1.0%.

The European Central Bank Meeting on Monetary Policy Accounts had an effect on the common currency as well. According to the memo, some officials favored a 50 basis point rate increase.

Moreover, the median inflation forecast for the next three years remained at 3%. Policymakers emphasized that the devaluation of the euro could exacerbate inflationary pressures, but that acting "decisively" now would eliminate the need for more aggressive rate hikes in the future.

Officials of the US Federal Reserve are more hawkish than ever before.

The market sentiment deteriorated further as US Federal Reserve speakers echoed their well-known hawkish tone.

Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, stated that there is more work to be done on inflation, and that while there is a risk of overshooting, there is little indication that inflation has reached its peak.

Charles L. Evans, president of the Federal Reserve Bank of Chicago, and Loretta Mester, president of the Federal Reserve Bank of Cleveland, have stated that inflation is their primary concern.

Governor Christopher Waller concluded by stating that he sees no reason to slow down the Fed's policy tightening. In the meantime, data from the United States has bolstered expectations that the Federal Reserve will continue its aggressive monetary tightening.

According to September Nonfarm Payrolls data, the nation added 265K new jobs in September, which was more than anticipated but less than the previous month.

The unemployment rate decreased unexpectedly to 3.5%, while labor force participation decreased less than anticipated to 62.3% from 62.3% in August. The news came after a string of dismal U.S. employment statistics.

On Tuesday, market participants learned that the number of job openings dropped dramatically in August, while the number of layoffs and discharges remained above 1.5 million.

Moreover, according to the Challenger Job Cuts report released on Thursday, US-based companies reported 29,989 layoffs in September, an increase of 46.4% from August and 67.8% from a year ago.

Finally, initial jobless claims for the week ending September 30 unexpectedly increased to 219K, exceeding expectations of 200K. Despite contradictory data, the employment market appears robust enough to withstand rate increases. Everything boils down to inflation.

There will be fewer but more exciting events during the following week. The US Federal Reserve will release the Minutes of its most recent meeting on Wednesday, and the government will release the September Consumer Price Index on Thursday.

Inflation is anticipated to increase by 8.1% this year, a slight increase from the 8.3% recorded in 2017. The anticipated core reading is 6.5%. If the CPI fell in August, it would likely have little impact on what the market expects the Federal Reserve to do.

Germany will release the Harmonized Consumer Price Index for September, which is anticipated to remain unchanged at 10.9%. Friday will focus on September Retail Sales in the United States.

EUR/USD Technical Perspectives

The EUR/USD pair briefly traded above the 61.8% Fibonacci retracement of the 1.0197/0.0535 decline at 0.9945, but closed the week below the 38.2% retracement at 0.9790, indicating that the corrective rise may have concluded.

In the coming days, the pair may retest and potentially break below the range's bottom.

The weekly chart shows that the pair failed just ahead of the daily falling trend line from the yearly high at 1.1494, indicating that the bearish trend will likely continue in the near future.

The 20 SMA remains significantly above the trend line and significantly below the longer moving averages. At oversold levels, technical indicators continue to display a lack of directionality.

Daily, the risk is weighted toward the downside. The pair is trading below all of its downward-trending moving averages. In the meantime, technical indicators maintain their downward trend after failing to surpass their respective apexes.

The 23.6% retracement of the aforementioned daily decline provides immediate support at approximately 0.9690. Prior to the multi-year low of 0.9535, the 0.9600 level is the next to monitor.

Most likely, sellers will await parity between 0.9870 and 0.9945. Even if the pair recovers above the latter, it must break above the trend line near 1.0050 to avoid falling.

EUR/USD Sentiment Analysis

In the coming weeks, the EUR/USD will likely remain under selling pressure, according to the FXStreet Forecast Poll. Bears dominate all time intervals considered. From now until the end of the year, the pair is anticipated to fluctuate within a range of 0.97.

The EUR is depicted negatively in the Overview chart. The three moving averages continue to decline, reiterating their previous declines and establishing new annual lows.

In addition, the monthly and quarterly forecasts suggest that a growing proportion of market participants now anticipate lower lows for the year below 0.9500, with probable drops below 0.9000.