Stop the drop, the dollar bulls are back. This is the EUR/USD weekly forecast.

During the first part of the week, the EUR/USD pair kept going up, but it failed miserably at parity and ended the week at about 0.9750, which is a slight loss for the week.

At the start of the fourth quarter, optimism was high. Wall Street reported huge gains, and government bonds kept their gains from the week before.

The EUR/USD is being helped by a willingness to take risks.

People on the market thought that the growing chance of a global recession would force central banks to slow down the rate of quantitative tightening as soon as possible.

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

The good feelings didn't last long, though. Wednesday, the EU proposed more sanctions against Russia for its invasion of Ukraine in February, which caused the value of the common currency to start going down.

After Russia illegally took over Donetsk, Luhansk, Kherson, and Zaporizhzhia, sanctions were put in place. These included a price cap on Russian oil and limits on what could be brought into and out of the country.

There are problems in the European Union.

Also, slow EU statistics brought back fears of a recession in the Union, which made people less willing to take risks. S&P Global lowered its September PMIs, which shows that the business sector is getting worse.

At the same time, wholesale inflation in the EU rose by 43.3% year over year in August, but retail sales fell by 0.3% in August and 1.3% in Germany.

The Meeting on Monetary Policy of the European Central Bank Accounts also had an effect on the currency that everyone used. Some officials wanted the rate to go up by 50 basis points, the memo said.

Also, the average prediction for inflation over the next three years stayed at 3%. Policymakers stressed that the devaluation of the euro could make inflationary pressures worse, but that if they act "decisively" now, they won't have to raise rates more quickly later.

People who work for the US Federal Reserve are more pessimistic than they have ever been.

As more speakers from the US Federal Reserve hit the wires and repeated their well-known "hawkish" tone, the mood on the market got even worse.

Neel Kashkari, president of the Minneapolis Fed, said that more work needs to be done on inflation and that, while there is a risk of overshooting, there isn't much evidence that inflation has reached its peak.

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

Lastly, Governor Christopher Waller said that he doesn't see any reason to stop the Fed from tightening its policies. In the meantime, data from the U.S. has made people think that the Federal Reserve will stick to its aggressive plan to tighten money.

According to the Nonfarm Payrolls data for September, the country added 265,000 new jobs, which was more than expected but less than the month before.

Unemployment fell more than expected to 3.5%, but the number of people working fell less than expected, from 62.4% in August to 62.3% in September. The news came after a string of bad numbers about jobs in the US.

On Tuesday, people in the market heard that the number of job openings dropped sharply in August, while the number of layoffs and discharges stayed at over 1.5 million.

Also, the Challenger Job Cuts report, which came out on Thursday, says that US-based companies laid off 29,989 people in September. This is up 46.4% from August and 67.7% from a year earlier.

Lastly, the number of first-time jobless claims for the week ending September 30 jumped by more than expected, from 200K to 219K. Even though the data are mixed, the job market seems strong enough to handle rate increases. It's all about inflation.

The next week will have fewer events, but they will be more exciting. On Wednesday, the US Federal Reserve will issue the Minutes of its most recent meeting, and on Thursday, the government will release the September Consumer Price Index.

This year, inflation is expected to rise by 8.1%, which is a bit more than the 8.3% rise last year. People expect the core reading to be 6.5%. If the CPI went down in August, it probably wouldn't change what the market thinks the Fed will do.

The September Harmonized Consumer Price Index will be released by Germany. It is expected to stay at 10.9%. On Friday, September US Retail Sales will be the center of attention.

The technical outlook for EUR/USD

The EUR/USD pair temporarily 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 that the corrective rise may have ended.

In the next few days, the pair could test the lower end of the range again and possibly break below it.

The pair also failed just before the daily falling trend line from the high of the year at 1.1494, which shows that the bearish trend will continue in the near future.

The 20-day simple moving average (SMA) is still a long way above the trend line and a long way below the longer ones. While this is going on, technical indicators continue to show that there is no clear direction at oversold levels.

Every day, the risk is more likely to go down than up. All of the pair's moving averages are pointing down, so it is trading below all of them. Technical indicators, on the other hand, are still going down after they failed to break through their midpoints.

At about 0.9690, the 23.6% retracement of the daily drop we just talked about provides support right away. Before the long-term low of 0.9535, the next level to watch is 0.9600.

Sellers will most likely wait for parity between 0.9870 and 0.9945. Even if the pair goes back above the second level, it must go above the trend line at about 1.0050 or it will fall.

Survey of EUR/USD Sentiment

According to the FXStreet Forecast Poll, the EUR/USD will likely stay under selling pressure in the next weeks. Bears dominate all time frames under consideration. From now through the end of the year, the pair is expected to remain steady around the 0.97 range.

The EUR is shown in a bleak light in the Overview chart. The three moving averages continue to fall, repeating their falls and setting new annual lows.

More importantly, the monthly and quarterly perspectives suggest that a growing percentage of market players are now forecasting lower lows for the year below 0.9500, with probable falls below 0.9000.