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On Monday, the EUR/USD pair fell below the 200.0% retracement level at 1.1165, but as mentioned yesterday, this level is weak, and the price has been moving horizontally for the past week. Therefore, although a decline toward the support zone of 1.1070–1.1081 is possible, there are currently no chart signals indicating the start of a "bearish" trend.
The wave situation has become slightly more complex but remains generally clear. The last completed downward wave (September 19–23) didn't break below the low of the previous wave, while the new upward wave broke the peaks of the previous two waves. Thus, the pair is either transitioning into a complex sideways trend or gradually beginning a new "bullish" trend. Consolidation below the support zone of 1.1070–1.1081 will likely invalidate the emerging "bullish" trend.
The information background on Monday once again favored the bears. First, inflation in Germany declined more than traders expected. Second, Christine Lagarde stated that the ECB might cut the interest rate by another 0.25% in October. Third, Jerome Powell almost dismissed the possibility of a 0.50% rate cut in November. What does this mean? Inflation in Germany is falling rapidly, providing the ECB with greater flexibility to ease monetary policy. The market anticipated an ECB rate cut no earlier than December, but now it might occur in both October and December. The Fed was expected to ease by 0.50% in November, but now a 0.25% cut seems more probable. All these factors support the U.S. dollar, although it has remained weak overall. We observed some strengthening yesterday, but this needs to continue. Many important reports will be released in the US this week (especially today) that could either support the dollar or lead to another decline. Nonetheless, the week has started optimistically for the U.S. currency.
On the 4-hour chart, the pair turned in favor of the U.S. dollar after forming a series of "bearish" divergences on the RSI and CCI indicators, but a decline has not yet occurred. The RSI entered overbought territory a few weeks ago, and another "bearish" divergence has appeared on the CCI indicator. However, considering the strength and momentum of the bulls, it's hard to anticipate a significant decline for the euro at this point. Consolidation below the 1.1139 level may indicate a move toward 1.1013, but on the hourly chart, the bears have yet to break even the nearest support zone.
In the last reporting week, speculators opened 5,514 long positions and 3,462 short positions. The sentiment of the "Non-commercial" group turned "bearish" a few months ago, but bulls have since regained dominance. The total number of long positions held by speculators is now 188,000, while short positions total only 116,000.
However, for the third consecutive week, major players have been reducing their euro holdings. Based on my analysis, this could signal the start of a new "bearish" trend or at least a correction. The primary factor driving the dollar's decline—the expectation of FOMC easing—has already played out, and there are no longer any clear reasons for further dollar weakness. Such factors might emerge over time, but for now, the growth of the U.S. currency seems more likely. Significant selling pressure on the euro has yet to begin, but if it does, the probability of a "bearish" trend will increase.
The economic calendar for October 1 includes several significant events—particularly the ISM index. The impact of this information on trader sentiment could be substantial today.
Sales of the pair are possible upon closing below the 1.1139 level on the 4-hour chart, with targets at 1.1081 and 1.1070. I would not recommend buying the pair at this time, as it is likely trading sideways, and indicators suggest a decline.
The Fibonacci levels are plotted from 1.0917–1.0668 on the hourly chart and from 1.1139–1.0603 on the 4-hour chart.
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