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On Monday, the EUR/USD pair first rose above the level of 1.0760 and then returned to the corrective level of 61.8% (1.0722). A rebound from this level suggests a potential reversal in favor of the euro and a resumption of growth towards the resistance zone of 1.0785–1.0797. However, I want to immediately note that yesterday's rise in the euro was not due to any informational background. Therefore, I cannot conclude that the trend has shifted to a "bullish" one. If the pair consolidates below the 1.0722 level, it will favor further decline towards the 76.4% Fibonacci level at 1.0676, from where the pair's growth initially started.
The wave situation has become confusing this week. A new upward wave has broken the peak of the previous wave, but there was no informational reason for such growth. The last completed downward wave failed to break the low of the previous wave, which can be seen as a sign of a trend change from "bearish" to "bullish." We have two such signs, but I also want to draw traders' attention to the fact that the last peak from June 18 was broken very weakly by only a few points. I would say that we are currently dealing with horizontal movement rather than a change to a "bullish" trend.
The informational background on Monday was quite interesting. From early morning, intriguing information began to come in. It all started over the weekend with the parliamentary elections in France. Some traders felt obliged to react to this data overnight on Monday. In the morning, it became known that inflation in Germany had slowed to 2.2%, which allows us to expect a slowdown in inflation in the Eurozone as well. The manufacturing activity indices generated only very slight interest among traders. In the second half of the day, they were more occupied with returning quotes to the point where the overnight growth had started. I don't see any dominance of bulls in the market.
On the 4-hour chart, the pair reversed in favor of the euro after forming a new "bullish" divergence on the CCI indicator. Last week, on the 4-hour chart, a close below the trend line was completed, which shifted traders' sentiment to "bearish." Thus, any "bullish" divergences (in my opinion) are signals of a correction. However, the hourly chart shows signs of a trend change to "bullish," and this week's informational background may support the bulls. But I wouldn't rush to such conclusions.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 4,094 long positions and opened 12,288 short positions. The sentiment of the "Non-commercial" group turned "bearish" a few weeks ago and is currently strengthening. The total number of long positions held by speculators now stands at 167,000, while the number of short positions is 175,000.
The situation will continue to shift in favor of the bears. I don't see long-term reasons to buy euros, as the ECB has begun to ease monetary policy, which will lower the yields of bank deposits and government bonds. In America, however, they will remain high for at least a few more months, making the dollar more attractive to investors. The potential for a decline in the euro is substantial, even according to the COT reports. Currently, the number of short positions among professional players is increasing.
Eurozone:
USA:
The economic events calendar contains many important entries on July 2. The news background can have a strong impact on trader sentiment throughout the day.
Sales of the pair are possible if it consolidates on the hourly chart below the level of 1.0722 with a target of 1.0676. Alternatively, selling is possible in case of a rebound from the zone of 1.0785–1.0797 with the same target. Buying the euro was possible on the hourly chart rebound from the level of 1.0722 today with a target of 1.0760. However, I see few reasons for buying in a fully horizontal movement. I believe that it is not worth the risk of buying it now.
The Fibonacci level grids are built from 1.0602 to 1.0917 on the hourly chart and from 1.0450 to 1.1139 on the 4-hour chart.
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