Stop the decline, dollar bulls are back

The EUR/USD pair advanced early in the week but failed spectacularly at parity, finishing at about 0.9750 with a slight weekly loss.

Wall Street reported massive gains and government bonds extended their gains from the previous week.

Risk appetite boosts EUR/USD.

Market participants believed a global recession would force central banks to slow quantitative tightening sooner rather than later.

The RBA raised the cash rate by 25 basis points, less than expected, fueling speculation and demand for high-yield assets.

Good vibes faded quickly. The euro began losing value Wednesday after the EU proposed more sanctions against Russia for its Ukraine invasion in February.

Following the illegal annexation of Donetsk, Luhansk, Kherson, and Zaporizhzhia, sanctions were imposed, including a price ceiling on Russian oil and import and export restrictions.

EU in trouble.

Slow EU statistics rekindled fears of an economic downturn, dampening risk-positive sentiment. S&P Global revised September PMIs lower, indicating a worse business decline.

In August, wholesale inflation in the EU rose 43.3% year-over-year, but retail sales fell 0.3% and German sales fell 1.3%.

Monetary Policy Meeting Accounts affected the currency. Some officials favored a 50-basis-point rate hike, the memo said.

The median 3-year inflation forecast was 3%. Devaluing the euro could worsen inflationary pressures, but acting "decisively" now will prevent the need to hike more aggressively later.

Fed officials have never been more hawkish.

Fed speakers echoed their hawkish tone, worsening market sentiment.

Minneapolis Fed President Neel Kashkari said there is more work to be done on inflation and that there is no sign that inflation has peaked.

Charles L. Evans of the Chicago Fed and Loretta Mester of the Cleveland Fed say inflation is their top priority.

Governor Christopher Waller sees no reason to slow Fed tightening. Meanwhile, U.S. data has fueled expectations that the Fed will continue tightening.

The country added 265K new positions in September, which was more than expected but lower than the prior month.

Unemployment fell to 3.5%, but labor-force participation fell less than expected to 62.3% from 62.4% in August. The news followed poor US employment numbers.

Job openings fell dramatically in August, while layoffs and discharges remained over 1.5 million.

In September, US-based firms reported 29,989 layoffs, up 46.4% from August and 67.7% from a year earlier, according to the Challenger Job Cuts report.

Initial jobless claims for the week ending September 30 jumped above expectations to 219K. Despite mixed data, the job market seems strong enough to withstand rate hikes. Inflation rules.

Next week will have fewer, more exciting events. On Wednesday, the Fed will release its latest meeting minutes, and on Thursday, the government will release the September CPI.

This year's inflation is expected to be 8.1%, up from 8.3%. Core reading is 6.5%. If August's CPI falls, it won't affect what the market expects the Fed to do.

Germany's Harmonized Consumer Price Index for September is expected to be 10.9%. Friday will bring September US Retail Sales.

EUR/USD Forecast

EUR/USD briefly traded above the 61.8% Fibonacci retracement of the 1.0197/0.0535 drop at 0.9945, but it ended the week below the 38.2% retracement at 0.9790, suggesting the corrective rise may have ended.

The pair may retest and break below the range's low in the coming days.

The pair failed just ahead of the daily falling trend line from the year high at 1.1494, indicating the bearish trend will continue.

The 20 SMA is above the trend line but below longer ones. Meanwhile, oversold technical indicators lack direction.

Daily risk is negative. All of the pair's moving averages point south. After failing to break their midpoints, technical indicators continue to fall.

23.6% of the daily decline provides support at 0.9690. Before 0.9535, watch 0.9600.

Sellers may wait until 0.9870 to 0.9945 parity. Even if the pair recovers above the latter, it must clear 1.0050 to avoid falling.

EUR/USD Sensex

According to FXStreet's Forecast Poll, the EUR/USD will remain under selling pressure. Bears dominate all timeframes. The pair should stay around 0.97 until the end of the year.

The Overview chart shows a bleak EUR. Three moving averages keep falling, setting new annual lows.

Monthly and quarterly perspectives suggest a growing percentage of market players forecast lower lows for the year below 0.9500, with probable falls below 0.9000.