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On Wednesday, the EUR/USD pair made a very slight reversal in favor of the euro, staying below the resistance zone of 1.0781–1.0797. As of Thursday morning, the pair has returned to this zone and is attempting to close above it. If the bulls manage to pull off this move, the euro could expect some growth toward the 161.8% corrective level at 1.0873. However, it is still too early to talk about a rise in the euro, as a rebound from the 1.0781–1.0797 zone is possible.
The wave pattern is clear. The last completed upward wave (September 25–30) did not surpass the peak of the previous wave, while the new downward wave (still forming) broke the lows of the previous three waves. Thus, the pair is now forming a new bearish trend. A corrective wave may appear soon, but the bulls have already lost their grip on the market. Regaining it will take significant effort, and it is unlikely they will manage it anytime soon.
There was practically no significant information background on Wednesday, but this morning, the first notable reports of the week were released in the Eurozone. The services and manufacturing PMIs from Germany and the Eurozone provided some support to the euro. Three out of four indices were better than traders' expectations, but the manufacturing sectors remained below the 50.0 mark. This suggests that while the reports were better than forecasts, they were not outstanding. The euro is unlikely to experience significant gains today based solely on this data. I therefore doubt that the bulls will have enough strength to hold above the 1.0781–1.0797 zone. A rebound from this zone could lead to further declines in the euro. The reasons for the euro's decline still outweigh those for a rise. Christine Lagarde's excessively dovish rhetoric this week surprised traders.
On the 4-hour chart, the pair consolidated below the 38.2% corrective level at 1.0807. Bullish divergences have recently formed on both indicators, but they only indicate a potential start of a correction, as the trend has shifted to bearish. Traders are currently ignoring these signals. At the same time, bearish divergences have formed, which are stronger in a bearish trend, but they have already been played out. The pair's decline may continue toward the 23.6% Fibonacci level at 1.0729. A consolidation above the 1.0807 level could allow for a small rise in the euro.
Commitments of Traders (COT) Report:
In the latest reporting week, speculators closed 4,547 long positions and opened 17,401 short positions. The sentiment of the Non-commercial group shifted to bearish a few months ago, but currently, the bulls are dominant again. However, their momentum weakens with each passing week. Speculators hold 169,000 long positions and 152,000 short positions.
For the sixth consecutive week, major players have been shedding the euro. In my view, this could be a precursor to a new bearish trend or at least a strong correction. The main factor behind the dollar's decline—expectations of FOMC policy easing—has already been priced in, and the market has fewer reasons to broadly sell the dollar. More reasons may emerge over time, but for now, the growth of the US dollar appears more likely. The technical analysis also points to the onset of a bearish trend. Therefore, I am preparing for a prolonged decline in the EUR/USD pair.
News Calendar for the US and the Eurozone:
October 24 features a packed economic calendar, but none of the events are highly significant. The impact of the information background on market sentiment today is expected to be moderate.
Forecast for EUR/USD and Trader Tips:
Sales of the pair are possible following a rebound from the 1.0781–1.0797 zone on the hourly chart, with a target at 1.0729. I would only consider buying the pair after a rebound from the 1.0781–1.0797 support zone, which has not yet occurred. Consolidation above this zone would offer a second chance to look for entry points for long positions with a target at 1.0873.
Fibonacci levels are drawn from 1.1003–1.1214 on the hourly chart and from 1.1139–1.0603 on the 4-hour chart.
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