Stop the fall, the dollar bulls have returned, according to our weekly forecast for the EUR/USD pair.

The EUR/USD pair managed to keep up its upward momentum throughout the first part of the week, but it was unable to achieve parity and finished the week at around 0.9750, which resulted in a slight loss for the week as a whole.

At the beginning of the fourth quarter, optimism was at an all-time high, with Wall Street reporting massive gains and government bonds extending their gains from the previous week.

The increased appetite for risk is providing support for the EUR/USD currency pair.

Participants on the market were of the opinion that an increase in the likelihood of a global recession would force central banks to slow the rate of quantitative tightening sooner rather than later.

This type of speculation, along with the demand for high-yielding assets, was fueled by the Reserve Bank of Australia's decision to raise the cash rate by only 25 basis points, which was less than was anticipated.

However, the positive energy didn't stick around for very long. On Wednesday, the European Union proposed additional sanctions against Russia for its invasion of Ukraine in February, which caused the value of the common currency to begin falling.

The unlawful annexation of the regions of Donetsk, Luhansk, Kherson, and Zaporizhzhia resulted in the imposition of sanctions, which included a price ceiling on Russian oil as well as restrictions on imports and exports coming from and going to the nation.

The European Union is Facing Difficulties Right Now.

In addition, sluggish EU statistics reignited fears of an economic downturn in the Union, which dampened the mood of being risk-positive. The September PMIs released by S&P Global were revised downward, indicating a more severe contraction in the business sector.

During the same time period, wholesale inflation in the EU increased by 43.3% year on year in August, while retail sales in the same month declined by 0.3%, with sales in Germany declining by 1.3%.

The meeting to discuss monetary policy at the European Central Bank Accounts were another factor that influenced the development of the common currency. According to the memo, a number of the officials voiced support for a more significant rate increase of fifty basis points.

In addition, the median projection for inflation over the next three years remained at 3%. The policymakers emphasized that the devaluation of the euro could make inflationary pressures worse, but they also emphasized that acting "decisively" now will eliminate the need to hike more aggressively in the future.

Officials at the United States Federal Reserve are more hawkish than they have ever been before.

The mood on the market continued to deteriorate as speakers from the US Federal Reserve hit the wires, echoing the hawkish tone that is traditionally associated with the Fed.

According to the President of the Minneapolis Federal Reserve Bank, Neel Kashkari, there is still more work to be done regarding inflation, and while there is a danger of overshooting, there is essentially no indication that inflation has peaked.

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

In conclusion, Governor Christopher Waller of the Federal Reserve stated that he does not see any reason to slow down the Fed's policy of tightening monetary policy. In the meantime, information coming out of the United States has added fuel to the fire of speculation that the Federal Reserve will maintain its aggressive course of monetary tightening.

The data from Nonfarm Payrolls for the month of September showed that the country added 265K new positions in September, which was more than was expected but lower than the previous month's total.

The unexpected drop in unemployment to 3.5% was partially offset by a smaller-than-expected drop in labor force participation to 62.3%, down from 62.4% in August. The news came in the wake of a series of disheartening employment numbers for the United States.

On Tuesday, participants in the market were informed that the number of job opportunities had significantly decreased in the month of August, while the number of layoffs and discharges continued to exceed 1.5 million.

In addition, the Challenger Job Cuts report that was released on Thursday stated that companies based in the United States reported 29,989 layoffs in September, which is an increase of 46.4% from August and 67.7% from September of the previous year.

In conclusion, initial claims for unemployment assistance for the week that ended on September 30 rose to 219 thousand, which was significantly higher than the forecast of 200 thousand. In spite of contradictory data, it would appear that the labor market is robust enough to withstand rate increases. Everything boils down to the rate of inflation.

The following week will feature fewer events, but each one will be more exciting than the last. On Thursday, the United States government will release the Consumer Price Index for the month of September, and on Wednesday, the Federal Reserve in the United States will publish the minutes from its most recent meeting.

It is anticipated that annual inflation will rise by 8.1% this year, which is a slight increase from the 8.3% seen last year. The reading for the core should be 6.5%, as expected. Even if the Consumer Price Index (CPI) dropped in August, it is unlikely that this will have much of an impact on what the market anticipates the Fed will do.

The September Harmonized Consumer Price Index will be published in Germany, and it is anticipated that the current reading of 10.9% will not change. On Friday, everyone will be looking at the Retail Sales numbers for the month of September in the United States.

Forecast for the EUR/USD Technical Market

After briefly trading above the 61.8% Fibonacci retracement of the 1.0197/0.0535 drop at 0.9945, the EUR/USD pair finished the week below the 38.2% retracement at 0.9790, which suggests that the corrective rise may have come to an end.

In the coming days, the pair may perform a retest of the region's lower boundary, which it may then proceed to break below.

The pair failed to break above the daily falling trend line that was drawn from the yearly high at 1.1494, as shown by the weekly chart. This suggests that the bearish trend will most likely persist in the not too distant future.

The 20 simple moving average continues to be located a considerable distance above the trend line and a considerable distance below the lengthier ones. During this time, technical indicators continue to point to a lack of directional strength at levels where they are considered to be oversold.

On a daily basis, the risk is weighted more toward the negative side. The price of the pair is currently trading lower than all of its moving averages, all of which are sloping downward. After failing to break through their respective midpoints, technical indicators are continuing their downward trend, which has been present for some time now.

The 23.6% retracement of the daily decline mentioned above provides immediate support when it is reached at approximately 0.9690. The next important level to keep an eye on is 0.9600, which is located in front of the multi-year low of 0.9535.

It's likely that sellers will hold off until the price reaches parity somewhere between 0.9870 and 0.9945. Even if the pair is able to recover above the latter, it still needs to break above the trend line around 1.0050 in order to avoid falling further.

A Look at the EUR/USD Attitudes

The EUR/USD is expected to continue to be under pressure from sellers over the next few weeks, according to the results of a poll conducted by FXStreet. Bears are dominant across all time frames that are being considered. It is anticipated that the value of the pair will remain relatively unchanged within the 0.97 range from now until the end of the year.

The euro is depicted in a negative light in the chart that is titled "Overview." The three moving averages have continued their downward trend, falling to new annual lows and repeating the pattern of their previous falls.

More importantly, the monthly and quarterly perspectives imply that a growing percentage of market participants are now forecasting lower lows for the year below 0.9500, with probable falls below 0.9000. These projections are based on the fact that the monthly and quarterly perspectives are becoming more similar to one another.