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On Wednesday, the EUR/USD pair performed a new reversal in favor of the European currency and resumed a weak growth process towards the corrective level of 50.0% (1.0760). A rebound from this level occurred on Tuesday, but quotes could not reach it on Wednesday. Thus, today, the pair may return to the level of 1.0722. Consolidation below this level will favor the US dollar and a further decline towards the corrective level of 76.4% (1.0676).
The wave situation remains clear. A new downward wave broke the low of the previous wave from June 11, while the last completed upward wave failed to break the peak of the previous wave. Thus, the bearish trend persists and continues to form. In the near future, the information background should allow the bears to maintain pressure. After the completion of the corrective upward wave, I expect the pair to resume its decline. The first sign of the bearish trend's completion will be a break of the peak of the last upward wave from June 12. However, in the coming days, it is unlikely that the bulls will be able to lift the pair to the level of 1.0850.
The information background on Wednesday could have been stronger. Throughout the day, there were no significant events in the US or the Eurozone. Thus, low trader activity is understandable. However, the absence of a news background does not affect the graphical picture. Since a bearish trend and a corrective wave are currently forming, it is logical to assume that a reversal in favor of the dollar will soon occur. This may have already happened around the level of 1.0760. If the bulls find the strength for another counterattack, the pair could rise to the important resistance zone of 1.0785-1.0797 and then rebound, ending the correction.
On the 4-hour chart, the pair reversed in favor of the euro after forming a bullish divergence with the RSI indicator. Quotes closed above the 61.8% Fibonacci level at 1.0714, but I do not believe in a prolonged euro growth. A week ago, on the 4-hour chart, there was a close below the trend line, changing trader sentiment to bearish. Thus, I expect a small correction, followed by a resumption of the decline. Consolidation below 1.0714 will confirm a resumption of the decline towards the 76.4% Fibonacci level at 1.0613.
During the last reporting week, speculators closed 1,260 long contracts and opened 22,966 short contracts. The sentiment of the "Non-commercial" group turned bearish a few weeks ago, and sellers are now increasing their positions. The total number of long contracts held by speculators is now 187,000, while short contracts amount to 144,000. The gap is narrowing.
The situation will continue to favor the bears. I do not see long-term reasons to buy the euro, as the ECB has started easing monetary policy, which will lower the yields of bank deposits and government bonds. In the US, yields will remain high for at least several more months, making the dollar more attractive to investors. The potential for a decline in the euro is significant, even according to the COT reports. If there is still a bullish sentiment among large players and the euro is falling, where will the euro be when the sentiment turns bearish?
On June 20, the economic events calendar contains several interesting entries from the US. However, the impact of the information background on trader sentiment today may only be felt in the second half of the day.
Sales of the pair were possible upon rebounding from the level of 1.0760 on the hourly chart, with targets at 1.0676 and 1.0602. These trades can be held for now. New sales should be considered upon consolidation below 1.0722. Purchases of the euro are possible today upon a rebound on the hourly chart from the level of 1.0722 with targets at 1.0760 and 1.0785 while simultaneously closing sales.
The Fibonacci levels are constructed at 1.0602-1.0917 on the hourly chart and at 1.0450-1.1139 on the 4-hour chart.
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