Forex - EUR/USD weekly outlook: September 30 - October 4

Investing.com - The euro was higher against the dollar on Friday as concerns over a U.S. government shutdown and uncertainty over the future direction of Federal Reserve policy weighed on the greenback.

EUR/USD rose to session highs of 1.3564, the highest since September 19, before paring back gains to settle at 1.3522, 0.24% higher for the day. For the week, the pair was 0.19% higher.

The pair is likely to find support at 1.3461, the low of September 25 and near-term resistance at 1.3567, the high of September 19 and a seven-month high.

The dollar weakened amid concerns that political wrangling in Washington could lead to a government shutdown and create a drag on fourth quarter economic growth.

Congress must pass a short-term budget by midnight on Monday in order to avoid a government shutdown.
 
Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare.

Later this month, Congress will also have to extend the U.S. debt ceiling which the U.S. Treasury Department has estimated will be reached by October 17.

Sentiment on the dollar remained negative following the Federal Reserve’s unexpected decision earlier this month to maintain its USD85 billion-a-month asset purchase program.

Data on Friday showing that U.S. consumer sentiment fell to its lowest level in five months underlined concerns over the outlook for the economic recovery.

The final reading of the University of Michigan’s consumer sentiment index fell to 77.5 in September from a reading of 82.1 in August, the lowest level since April.

In the week ahead, investors will be focusing on Friday’s U.S. nonfarm payrolls report, for indications on whether the economic recovery is sufficiently strong for the Fed to start rolling back its stimulus program.

Markets will also be closely watching developments in U.S. budget negotiations, as well as Wednesday’s interest rate decision by the European Central Bank.

Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.

Monday, September 30

The euro zone is to release preliminary data on consumer price inflation, which accounts for the majority of overall inflation.

The U.S. is to release a report on manufacturing activity in Chicago.

Tuesday, October 1

The euro zone is to publish data on the unemployment rate, while Spain and Italy are to release data on manufacturing activity. Germany is to release official data on the change in the number of people unemployed, a leading economic indicator.

In the U.S., the Institute of Supply Management is to produce a report on manufacturing activity, a leading economic indicator.

Wednesday, October 2

Spain is to release official data on the change in the number of people unemployed.

The ECB is to announce its benchmark interest rate. The announcement is to be followed by what will be a closely watched press conference with President Mario Draghi.

The U.S. is to release the ADP report on nonfarm payrolls, which leads the closely watched government report by two days.

Thursday, October 3

The euro zone is to release data on retail sales, while Spain and Italy are to release data on service sector activity. Markets in Germany will be closed for a national holiday.

Later Thursday, the U.S. is to release the weekly government report on initial jobless claims along with data on factory orders. Meanwhile, the ISM is to produce a report on non-manufacturing activity, a leading economic indicator.

Friday, October 4

Germany is to release data on producer price inflation.

The U.S. is to round up the week with the closely watched government report on nonfarm payrolls, the unemployment rate and average hourly earnings.