EUR/USD – 1H.
The EUR/USD pair performed a reversal in favor of the US currency on Monday and fell almost to the level of 1.1250. However, there was no rebound from this level and eventually, traders turned the pair in favor of the European currency, after which an increase was made to the corrective level of 161.8% (1.1357). The rebound of quotes from this Fibo level will allow us to count on a new reversal in favor of the US currency and some fall. Closing the rate above the level of 1.1357 will increase the chances of further growth in the direction of the upper limit of the downward trend corridor, which still characterizes the mood of traders as "bearish". Although the markets have been doing nothing but discussing the new Omicron strain for the last few days, I believe that it has practically no effect on the dollar or the euro. The growth of the European currency on Friday and Tuesday looks quite unexpected. However, when looking at the older charts, it is visible that the dollar has been growing for quite a long time. Thus, now we can observe a correction against this movement. The strain "Omicron" could cause a reaction of traders, but it is unlikely that it would be the sale of the American currency. In the confrontation between the euro and the dollar, it is the euro that looks weaker now, as the fourth wave of the epidemic continues in the European Union, due to which several countries have already been quarantined. And there is nothing like that in America. Yesterday, Fed President Jerome Powell said that the new strain of Omicron could create additional risks for the US economy, especially for employment and inflation. In other words, Powell admits that inflation could rise even more due to even greater disruptions in supply chains. Also, the Fed president believes that many Americans may refuse to work in the office because of the new strain and generally from work. Economic activity may decrease. All this can lead to a decrease in the growth rate of the economy. However, I note that in this case, the pace will decrease not only in the United States but also in the European Union. Omicron is a threat to everyone, but so far it does not negatively affect the economy.
EUR/USD – 4H
On the 4-hour chart, the growth process continues in the direction of the Fibo level of 127.2% (1.1404). The bearish divergence of the CCI indicator allowed us to count on a reversal in favor of the US currency and a slight fall, but it was canceled today. The rebound of quotes from the level of 127.2% will allow us to expect a reversal in favor of the US currency and a slight drop, and closing above the level of 1.1404 will increase the likelihood of continued growth towards the next corrective level of 100.0% (1.1606).
News calendar for the USA and the European Union:
EU - consumer price index (10:00 UTC).
US - Chairman of the Fed Board of Governors Jerome Powell will deliver a speech (15:00 UTC).
US - Finance Minister Janet Yellen will deliver a speech (15:00 UTC).
On November 30, the European Union has already released a report on inflation, which jumped to 4.9% in November. There will also be speeches by Powell and Yellen today. Thus, in general, the information background today is quite strong.
COT (Commitments of Traders) report:
A new COT report showed that during the reporting week, the mood of the "Non-commercial" category of traders became much more "bearish". Speculators have opened 6246 long contracts on the euro currency and 20289 short contracts. Thus, the total number of long contracts in the hands of speculators has grown to 206 thousand, and the total number of short contracts - to 229 thousand. Over the past two weeks, speculators have opened more than 40 thousand short contracts. Thus, the "bearish" mood among the most important category of traders continues to strengthen. Consequently, the European currency may resume falling in the near future. According to COT reports, there are no signs of possible long-term growth of the euro yet.
Forecast for EUR/USD and recommendations to traders:
I do not recommend new sales of the pair yet, since the euro is set for a correction. Purchases of the euro currency could be opened, as the closing was made above the level of 1.1250 on the hourly chart with a target of 1.1357. At the moment, this goal has been achieved. New purchases – when closing above 1.1357 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.