EUR/USD Forecast: ECB and NFP done. Now what?

The EUR/USD pair is about to close the week in the red, in this last week of summer holidays, having survived around the 1.1100 level the two major events of the month: the ECB economic policy meeting, and the US Nonfarm Payroll report. 

When it comes to the first, the European Central Bank surprised negatively on the markets, with a more dovish than-expected stance. By downgrading its forecasts of inflation and growth, the Central Bank has acknowledged the ongoing stimulus is hardly enough to save the Euro area. China´s economic slowdown has played a major role in the ECB decision, and given that the Asian country turmoil is far from over, the downward risk for the European economy is still too high. 

Investors hopes that the US will raise rates this September tumbled on fears that the Chinese  economic slowdown will weigh on other major economies, and ECB decision has proved its already doing it. And the US Nonfarm Payroll report did little to help, printing 173K in August against the 223K expected. There were "some" good news, as the unemployment rate fell down to its lowest in 7 years, down to 5.1% whilst wage ticked higher. Is however, that "some" the "some" improvement in data that the FED was asking for in its latest meeting? 

Personally, I believe that the answer is yes. That the FED will raise rates, despite the background is the worst ever possible, and beyond inflation continues subdued. Indeed, oil bottoming below $40.00 could be a small sign that inflation has also bottomed. But I believe the FED will raise rates anyway, just to prove their case, on pure American pride and stubbornness. Of course, that's just a personal take and nothing else.

But I may not be alone in my belief, ever since the dollar is edging higher across the board. The US markets will be closed on Monday, due to the labor holiday, but full volumes will be back on Tuesday, and the picture will then be clearer. 

View live chart of the EUR/USD

In the meantime, the  pair EUR/USD has erased most of its latest wild advance, and the weekly chart shows that its currently pressuring its 20 SMA, whilst the technical indicators have lost their upward potential, but present for the most, a neutral stance. Daily basis, the bearish potential has increased sharply this week, giving that the pair was unable to extend beyond  a strong Fibonacci level, the 61.8% retracement of the previous 2-weeks advance at 1.1280, and that the price is now back below its 20 SMA, whilst the technical indicators are crossing their mid-lines towards the downside. 

In the same chart, the 100 and 200 SMAs are quite close around the current level, which means the longer term outlook is still not clear. Anyway, the main support for the upcoming days is 1.1020, in where the pair will complete a full 100% retracement, with a break below it exposing the pair to a downward continuation towards the 1.0840/80 price zone. The immediate resistance is 1.1160, followed by the mentioned Fibonacci level at 1.1280. It will take a recovery above this last to see bulls recovering ground, with the pair then probably extending up to the 1.1440 price zone. 

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