EUR/USD – 1H.
The EUR/USD dropped to the corrective level of 1.1552 on Thursday. However, there was neither a rebound from this level nor a consolidation below it. Thus, traders did not get a strong signal near this level. Yesterday's information backdrop was very eye-catching for traders, particularly for understanding future actions by EU and US central banks. The Fed has started to gradually tighten its monetary policy. By the middle of next year, the QE programme will be complete and the key rate could be raised once or twice in 2022. Thus, unless there is a sharp deterioration in the economic situation in the USA, monetary policy will only tighten. This is not the first time the ECB has signalled that it is not yet ready for a serious policy tightening. Christine Lagarde, who spoke on both Wednesday and Thursday, said that interest rates were unlikely to be raised next year.
As for the stimulus programme, it is not so clear-cut. The ECB has decided to reduce its asset purchases little by little and end the programme completely as planned by March 2022. But at the same time, the ECB made it clear that the economic stimulus conditions will be maintained because the economy itself is still very weak and inflation is temporary and not yet in line with target levels in the long term. Thus, a further tightening of monetary policy is now possible in the USA, but not in the EU. It thus opens up the prospect for a new upturn in the US currency. Bull traders have made cautious attempts to start a new trend over the past month, but they have ended in failure. The euro-dollar pair is still slowly but surely sliding downwards. Today the important event of the day will be the publication of the NonFarm Payrolls report in the USA, which might change the mood of traders.
On the 4-hour chart, the quotes made two pullbacks from the 100.0% corrective level of 1.1606. Therefore, a new reversal in favour of the American currency was made and a new fall towards the Fibo level of 127.2% to 1.1404 was initiated. There are no emerging divergences in any of the indicators today. A close above 1.1606 will allow expecting some growth in the pair towards the corrective 76.4% level of 1.1782.
News calendar for the USA and the European Union:
US - Unemployment Rate (12:30 UTC)
US - Non-Farm Employment Change (12:30 UTC)
US - Change in average hourly earnings (12:30 UTC)
There will be no important events on the EU calendar on November 5, but the general information backdrop will remain strong as unemployment and payrolls reports will be released in the US today. Therefore, there could be strong moves in the afternoon.
COT (Commitments of Traders) report:
The latest COT report showed that the sentiment of the "Non-commercial" category of traders did not change during the reporting week. Speculators opened 4,058 long euro contracts and 3,861 short contracts. Thus, the total number of long contracts in the hands of speculators has grown to 199 thousand, and the total number of short contracts - up to 210 thousand. Over the past few months, the "Non-commercial" category of traders has tended to get rid of long contracts on the euro and increase short contracts. Or increase short at a higher rate than long. In general, this process continues now, but in the last three weeks, the European currency has been leaning towards weak growth (if we do not take into account the last day of last week). In general, the fall of the euro still looks more preferable.
EUR/USD forecast and recommendations to traders:
Buy the pair if it closes above 1.1606 on the hour chart, with the targets 1.1629 and 1.1704. Sell the pair if it closes below 1.1552, with a target of 1.1450.
Terms:
"Non-commercial" - major market players: banks, hedge funds, investment funds, private, large investors.
"Commercial" - commercial enterprises, firms, banks, corporations, companies that buy foreign currency not to make speculative profits, but to ensure current activities or export-import operations.
"Non-reportable positions" are small traders who do not have a significant impact on the price.