Political machinations in Europe and labour data in the US are likely to be the primary drivers of the Euro to US Dollar pair in the coming week.
The pair was in strong overall uptrend - and may still be - but it has changed trend on the very short-term basis, on the four-hour chart (shown below) after the sequence of peaks and troughs reversed lower.
This is the first sign the broader trend could be changing.
Towards the end of the week the pair bounced from the 1.1715 lows and risen back up to the current 1.1818 level, however, we see this move as purely corrective and the very short-term downtrend which started after the exchange rolled over at the 1.1833 highs, will probably eventually resume.
A break below the 1.1717 lows would lead to an extension lower to a target at the S1 monthly pivot at 1.1660.
Monthly pivots are barriers to prices as they attract counter-trend buying or selling from traders anticipating a bounce or pull-back.
News and Data for the Euro
The Euro may face fresh political headwinds emanating from both Catalonia where seperatists have been trying to hold a referencddum and the rise of the anti-EU Afd party in Germany, however, in both cases it appears that the nationalists are in the minority, so the impact is unlikely to last long.
Indeed, Kathy Lien thinks the Euro could rebound significantly on the news of a the formation of a coalition government in Germany in the coming week as it is unlikly the Afd would have anything more than a bit part in the overall drama - if that.
From a hard data perspective the main release in the coming week, is Eurozone Unemployment in August, out at 10.00 BST on Monday, October 2, which is expected fall again to 9.0% from 9.1% where it got stuck in July, however, given the widespread habit of taking the month off in many continental countries that forecast is arguably optimistic.
The next major release is Retail Sales in August, which is expected to bounce back by 0.3% from a -0.3% result recorded in July.
Finally, the minutes of the last European Central bank meeting in September will be published at 12.30 on Thursday, October 5, and may provide further clues as to the ECB's thinking in terms of the implementation of its phasing out of quantitative easing (QE), which is expected to be more seriously discussed and announced at the next October meeting.
If it shows strong signs of unanimity on the idea of reducing QE quickly, or any deatail on tapering (unlikely), the Euro could rise.
Further vacilation and vaugueness, might increase uncertainty, on the other hand, and lead to a weakening of the Euro.
News and Events for the Dollar
The main event for the Dollar in the coming week is Non-Farm Payrolls, out at 13.30 BST on Friday, October 6, about which there appear to be a wide variation of forecasts.
Some analysts think the result will be very low, at around 75k, because it will reflect the impact of Hurricane Harvey, whilst others, such as Market IHS, say their employment indicators estimate Payrolls will come out at a robust 180k.
The figure for the previous month of August was 156k.
Of great interest will be wage component, as the Fed is banking on wages rising in line with the tighter labour market; in August wages were 2.5%, but will probably need to rise a little higher, to support the Federal Reserve's plans to raise interest rates before the end of the year.
Recent data and speeches from Fed officials indcaates the central bank may be cooling on the idea of raising interest rates before the end of the yeat, says BK Asset Management's, Managing Director, Kathy Lien:
"A number of the Federal Reserve officials who spoke this past week did not sound as enthusiastic about raising interest rates and data, including the latest personal income, spending and PCE deflators were softer. We’ll hear from more Fed Presidents in the coming week and perhaps their views will be different."
Another major release for the Dollar is ISM Manufacturing at 15.00 on Monday, which is expected to pull-back to 58.0 and ISM Non-Manufacturing at the same time on Wednesday, which is forecast to show a small rise to 55.5.