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On Friday, the EUR/USD pair fell by 50 points, which caused confusion among many. However, Monday brought clarity. The dollar began to fall right from the market's opening, correcting the baseless rise on Friday. The pair's consolidation above the 161.8% corrective level at 1.0873 suggests a continued upward movement towards the resistance zone of 1.0929–1.0946.
The wave situation is straightforward. The last completed upward wave (September 25–30) did not break the peak of the previous wave, while the most recent downward wave broke the low of the last three waves. Thus, the pair is currently forming a new bearish trend. A corrective wave is now forming, but the bulls have already lost momentum in the market. Regaining control would require significant effort, which is unlikely in the near future.
Friday's data proved to be a complete disappointment for the U.S. dollar. The market had already sensed that the U.S. labor market was recovering and that the worst was behind. However, the Nonfarm Payrolls report showed only 12,000 new jobs created in October. Many economists indicated that such a low number was due to hurricanes in the U.S., but in my opinion, the U.S. labor market is not improving. While September saw relatively strong numbers, the figures for August and September were revised down by 112,000. Regardless of the reasons behind October's payroll decline, the overall trend still shows fewer new jobs, revisions to the downside, or simply low numbers. The key question now is how much the FOMC will lower the interest rate this week. However, the market seems calm, expecting that October's labor market failure won't alter the Fed's plan to cut the rate by only 0.25%. Overall, Friday's statistics have already been priced in, and the market is now looking forward to the FOMC meeting.
The pair closed above the 50.0% corrective level at 1.0872 on the 4-hour chart, suggesting a potential continuation of growth towards the next Fibonacci level at 61.8% (1.0935). The formation of a bullish divergence in the CCI indicator also supported the bulls. A rebound from the 1.0935 level would favor the U.S. dollar and a resumption of the decline. However, this week's strong information background will likely have a significant impact on the EUR/USD exchange rate.
Commitments of Traders (COT) Report
During the last reporting week, speculators opened 6,154 long positions and 27,934 short positions. The sentiment of the "Non-commercial" group shifted to bearish. The total number of long positions held by speculators is now 159,000, while short positions stand at 209,000.
For the eighth consecutive week, major players have been reducing their positions in the euro. This could signal a new bearish trend or at least a significant correction on a global scale. The key reason for the dollar's previous decline—expectations of FOMC easing—has been priced in, leaving the market with fewer reasons to sell off the dollar en masse. While reasons may arise over time, the growth of the U.S. currency is currently more likely. Chart analysis also points to the beginning of a bearish trend, leading me to anticipate a prolonged decline in the EUR/USD pair.
News Calendar for the U.S. and the EU
EU – Manufacturing PMI in Germany (08:55 UTC).
EU – Manufacturing PMI (09:00 UTC).
The economic events calendar for November 4 contains only two relatively minor entries. The impact of the information background on market sentiment for the day may be minimal.
Forecast for EUR/USD and Trading Tips
Trades should be approached with caution this week. The U.S. presidential election and the FOMC meeting could trigger significant volatility and unpredictable movements.
Fibonacci levels are plotted from 1.1003–1.1214 on the hourly chart and from 1.1139–1.0603 on the 4-hour chart.
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