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On Friday, the EUR/USD pair continued trading above the 323.6% Fibonacci level at 1.0532. However, on Monday, the pair reversed in favor of the US dollar and consolidated below 1.0532. This indicates that a new downward wave is likely to begin today, targeting 1.0420 and 1.0320.
The current wave structure is straightforward. The last completed downward wave broke below the previous low, while the new upward wave has yet to breach the previous high. As a result, the pair remains in a bearish trend, and bulls have lost their market momentum. To reverse this trend, the pair must rise above 1.0611, a level it failed to breach last week.
The market news on Friday was weak. While the EU Consumer Price Index is an important report, November's data did not offer any compelling insights to drive significant market action from bulls or bears. Additionally, the US Thanksgiving holiday reduced market participation.
Today marks the start of a new week and a new month, beginning with a strengthening of the US dollar. This early move suggests a positive outlook for the greenback. Traders buying the dollar ahead of critical reports indicates a predisposition toward dollar growth. Remember, we are still within a bearish trend, which increases the likelihood of further dollar appreciation.
European news today is unlikely to have a significant impact. Indicators such as the unemployment rate in the EU and manufacturing PMIs from the EU and Germany, are not expected to move the market significantly. Instead, traders are focusing on ECB President Christine Lagarde's speech, which may provide critical guidance ahead of the final ECB meeting of 2024, and the ISM Manufacturing PMI from the US.
On the 4-hour chart, the pair rebounded from the 1.0603 Fibonacci level, forming a bearish divergence on the CCI indicator. This resulted in a reversal in favor of the US dollar, initiating a new decline toward the 127.2% Fibonacci level at 1.0436. The likelihood of further declines remains high.
COT Report (Commitments of Traders)
In the latest reporting week, speculators closed 5,698 long positions and opened 29,422 short positions. The sentiment of the Non-commercial group remains bearish, supporting further declines for the pair. Speculators now hold 154,000 long positions compared to 197,000 short positions.
For ten consecutive weeks, major players have been selling off the euro, strongly signaling the onset of a new bearish trend. The key factor driving the dollar's previous decline—expectations of FOMC policy easing—has already played out, leaving the market with fewer reasons to sell the dollar. While such reasons may emerge later, the greenback's continued strength appears more likely. Technical analysis also supports the development of a long-term bearish trend, suggesting the EUR/USD pair is heading for an extended decline. The latest COT data does not indicate a bullish trend reversal.
Economic Calendar for the EU and US
On December 2, several notable events are scheduled. The ISM Manufacturing PMI is expected to moderately influence market sentiment.
EUR/USD Forecast and Trading RecommendationsNew short positions were recommended if the pair rebounded from the 1.0603 Fibonacci level on the 4-hour chart, targeting 1.0420 and 1.0320. These trades can currently remain open. Long positions could have been considered if the pair rebounded from 1.0420 on the hourly chart (although no clear rebound occurred) or from 1.0532 targeting 1.0662 (which also did not materialize on Friday). For today, long positions are not recommended.
Fibonacci levels are plotted from 1.1003–1.1214 on the hourly chart and from 1.0603–1.1214 on the 4-hour chart.
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