EURUSD now below 200-day MA"Investors flocked to buy the dollar"U.S. ISM services data is key for USDECB speakers in focus for EUR this week

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The Euro appears to have lost the initiative against the Dollar with the coming week potentially resulting in further losses for the Eurozone's single currency according to new studies.

Following a 0.75% decline on Thursday, the Euro to Dollar exchange rate (EURUSD) declined 0.65% on Friday in moves that underscores building downside momentum amidst ongoing support for the Greenback.

The Dollar initially dropped following the release of mixed non-farm payroll (NFP) data on September 01 but soon turned around and tore higher into the week's close.

This price action underscores how futile it is to bet against the Dollar in the current backdrop and underscores why this week ahead forecast leans in favour of further Euro-Dollar underperformance.

"The Euro licks its wounds after 1.4% drop in two days and close below 200dma (1.0816) after NFP," says Kenneth Broux, an analyst at Société Générale, detailing a potentially significant technical development in the charts:

Above: The EURUSD is losing momentum and has now dipped below the 200-day moving average.

"The counter-intuitive reaction to higher US unemployment rate on Friday showed no sign of subsiding in Asia overnight at least in FX where the dollar is consolidating gains," adds Broux. "Investors flocked to buy the dollar at the lows against euro."

This week's U.S. data calendar focus rests on the midweek release of the ISM services index for August.

The market looks for a reading of 51, down on July's 52.3, with an undershoot having the potential to undermine the Dollar, and the opposite proving likely on any beat.

Turning to the Euro, European Central Bank (ECB) Governing Council members are in focus Monday, with ECB President Christine Lagarde the highlight as she is scheduled to deliver comments at 14:30 BST.

She will be bookended by Elderson and Lane, all of whom should provide the market with guidance as to what the central bank will do when it delivers its September 14 decision.

Last week we received Eurozone inflation data that was, on balance, more robust than the market was expecting, although core inflation did fall back as expected.

ECB members will therefore likely acknowledge the difficulty high inflation still poses to their decision-making, allowing them to lean towards another rate hike in September.

"The hawkish hold narrative that the ECB had been angling for at the next meeting is likely slipping away a bit as these sorts of prints are going to put pressure on them to hike at the next meeting instead," says Brad Bechtel, Global Head of FX at Jefferies LLC.

Above: President Lagarde. Photo: Martin Lamberts/ECB.

But the Council members will also have to acknowledge that economic data has undershot the ECB's projections as the economy slows faster than was expected, raising the prospect that inflation will fall sharply over the coming months.

This would lean against a September rate hike, raising the uncertainty around the upcoming decision and meaning Euro exchange rates could be highly reactive to both the final decision and the guidance delivered by ECB members in upcoming speeches.

ECB Governing Council members Schnabel and De Guindos will meanwhile speak on Tuesday (13:30 BST and 15:30, respectively), both have delivered speeches in the recent past that have tended to move the Euro and they will therefore be closely monitored by markets.

Thursday sees the release of Eurozone GDP for the second quarter, where an increase of 0.3% q/q is expected to be announced.

An undershoot would reinforce the narrative that the economy is struggling more than the ECB had expected, thereby giving rise to expectations that the central bank would skip a hike in September to allow the impact of previous hikes to work through.

The ECB's rate decision and guidance on future decisions will meanwhile prove a key moment for the Euro in the coming month. "In either scenario the EUR should underperform," says Bechtel.

"If they do a hawkish hold it won't be enough to fight back inflation and if they do end up hiking it will be at the expense of growth," he explains, adding:

"I do think directionally there is only one way for the EUR/USD from here."