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On Thursday, October 31, the EUR/USD pair returned to the 161.8% retracement level at 1.0873, showing another rebound and two consolidations below this level. The latest close below 1.0873 suggests the possibility of further declines toward the support zone at 1.0781–1.0797. Conversely, another close above 1.0873 would increase the likelihood of further growth toward 1.0929.
The current wave pattern is clear. The last completed upward wave (September 25–30) did not exceed the previous peak, while the recent downward wave broke below the lows of the previous three waves. This pattern suggests that the pair is forming a new bearish trend. A corrective wave has begun, but the bulls have already lost momentum in the market. Regaining control would require considerable effort, which is unlikely to be feasible in the near term.
Thursday's data influenced both bullish and bearish traders. Initially, the Eurozone consumer price index exceeded expectations, which was then followed by the U.S. core personal consumption expenditures index also surpassing forecasts. These indices alone do not confirm that the ECB and Fed will moderate their approach to rate adjustments, but the market reacted distinctly—first boosting the euro, then the dollar. I expect both the ECB and the Fed to adjust rates at their next meetings. If inflation continues to rise in the EU or the U.S., central banks may adjust their MP approach accordingly. For now, inflation has not increased enough to alter existing plans. The key focus this week is the U.S. labor and unemployment reports, which could significantly impact the Fed's MP ahead of its meeting next week.
On the 4-hour chart, the pair rose to the 50.0% retracement level at 1.0872, though the bulls appear to remain weak. A rejection from this level would favor the U.S. dollar, resuming the decline toward the 23.6% Fibonacci level at 1.0729. A breakout above 1.0872 would support continued growth toward 1.0935. Currently, no significant divergences are noted in any indicators.
Commitments of Traders (COT) Report
Over the last reported week, speculators closed 16,160 long positions and opened 29,514 short positions, shifting the "Non-commercial" group's sentiment to a short position. Speculators now hold 153,000 long positions and 181,000 short positions.
For seven consecutive weeks, major players have been reducing their euro positions, indicating the potential start of a new bearish trend or, at minimum, a significant correction. The primary factor behind dollar weakness—anticipation of a more dovish Fed MP—is largely priced in, leaving fewer immediate reasons to sell the dollar. As conditions currently stand, further growth of the U.S. currency seems more probable. Technical analysis also indicates the beginning of a bearish trend, which is why I am preparing for an extended EUR/USD decline.
News Calendar for the U.S. and Eurozone:
November 1 features four significant data releases, which could substantially impact market sentiment in the second half of the day.
EUR/USD Forecast and Tips for Traders
Selling opportunities arise if the pair closes below the 1.0781–1.0797 range on the hourly chart, targeting 1.0729, or after a reversal from the 1.0929–1.0946 range. Buying was feasible on a rebound from the 1.0781–1.0797 range with a target of 1.0873, which has been reached. I would recommend holding off on new purchases for now.
The Fibonacci levels are drawn from 1.1003–1.1214 on the hourly chart and from 1.1139–1.0603 on the 4-hour chart.
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