10.12.202413:13 Forex Analysis & Reviews: EUR/USD. December 10: Bulls Have Exhausted Their Potential

On Monday, the EUR/USD pair rebounded from the 323.6% retracement level at 1.0532, showed some growth, and then returned to the same level. A new rebound from this level today could lead to another rise in the euro, but a close below it seems more likely, with further declines toward the 1.0420 level. Bulls are losing market momentum, though their grip was weak to begin with.

The wave structure is straightforward. The last completed downward wave did not break the previous low, while the last upward wave barely broke the previous peak. As a result, the pair has started forming a "bullish" trend, which appears weak and may end this week. A drop below 1.0461 would invalidate the current "bullish" trend.

There was no significant news on Monday, but several key factors this week could trigger a new dollar rally:

1. The "bullish" trend is unconvincing, with each upward wave barely exceeding the previous one by a few points.
2. The "bullish" waves are generally weak.
3. The ECB is expected to cut interest rates this week.
4. The Federal Reserve might keep rates unchanged in December.
5. The daily chart shows a "bearish" trend.

Based on these factors, I believe the bulls have tried but failed. A new decline in the pair and a corresponding dollar rally are likely. Tomorrow's U.S. inflation report could influence this scenario, but I think even low inflation won't strengthen the bulls significantly. Weak inflation might work against the dollar, but at most, it could trigger another unconvincing "bullish" wave while the "bearish" trend remains intact.

On the 4-hour chart, the pair rebounded twice from the 100.0% retracement level at 1.0603, initiating a new decline toward the 127.2% Fibonacci level at 1.0436. A "bearish" divergence on the CCI indicator also supports downward movement. Consolidation above 1.0603 would allow for continued growth toward the next retracement level at 76.4% (1.0747), but my main scenario is further declines.

Commitments of Traders (COT) Report

During the last reporting week, speculators opened 11,359 long positions and 12,839 short positions. The sentiment among the "Non-commercial" group remains "bearish," indicating further declines for the pair. The total number of long positions held by speculators now stands at 168,000, while short positions total 225,000.

For 12 consecutive weeks, major players have been reducing their exposure to the euro. This suggests the formation of a new "bearish" trend. The primary driver of the dollar's decline—expectations of FOMC monetary policy easing—has already played out. The market no longer has a compelling reason to sell off the dollar, and the dollar's rise remains more likely. Graphical analysis also supports the start of a long-term "bearish" trend. As such, I am preparing for an extended decline in the EUR/USD pair.

Economic Calendar for the U.S. and Eurozone

• Eurozone: Consumer Price Index (07:00 UTC).

On December 10, the economic calendar contains only one significant entry. The informational background's impact on market sentiment may be minimal.

Forecast and Trading Tips for EUR/USD

• Selling: New sales could have been initiated after a rebound from the 1.0603 level on the 4-hour chart, targeting 1.0420 and 1.0320. These positions can now be held, waiting for a close below 1.0532 on the hourly chart.
• Buying: Long positions could have been considered after a rebound from 1.0532 on the hourly chart. However, Monday's session demonstrated that bears are stronger than bulls.

Fibonacci Levels:Fibonacci levels are drawn from 1.1003–1.1214 on the hourly chart and from 1.0603–1.1214 on the 4-hour chart.