Hello, dear traders! On Tuesday, the EUR/USD pair rose to the 161.8% correction level at 1.0574, rebounded from it and reversed in favor of the US dollar, falling towards the 200% Fibonacci level at 1.0430. Therefore, the bull traders failed for the second time trying to rise above the level of 1.0574. As seen, the euro stopped declining against the dollar during the last two weeks. However, it showed very modest growth. I think it is too early to expect the euro's substantial rise. Meanwhile, ECB President Christine Lagarde came under the pressure of her colleagues, ECB Chief Economist Philip Lane and ECB Vice-President Luis de Guindos in particular. Notably, Lane and de Guindos were the first to discuss a possible ECB interest rate hike about a month ago, while Christine Lagarde did not express her view on this issue. Moreover, traders kept in mind her earlier remarks in 2022, when she fiercely opposed any monetary policy tightening.
However, high inflation in the euro area is the reason why the regulator is changing its plans. Therefore, the first rate hike may take place in July and the next one is likely in September. Moreover, not experts and economists make such forecasts. This data is in line with Lagarde's speech, thus it is reliable. The question is whether the euro can benefit from these two rate hikes? Taking into account almost any chart, the picture is the opposite. The euro's decline is more likely than its growth. It is better to answer this question after the next ECB meeting. However, that means that the euro could remain very weak over the next month. Moreover, the Fed might raise the rate by another 0.75% in July. Considering this scenario, the euro can fall against the US dollar. Yesterday, there were no significant events in the EU, while Fed Chair Jerome Powell delivered his speech in the US.
On the 4H chart, the EUR/USD pair reversed in favor of the US dollar after the CCI indicator formed a bearish divergence. The pair started to fall and it may continue declining towards the 127.2% Fibonacci level at 1.0173. The pair's consolidation above the descending trend channel will favor the euro. Then it is possible to expect the euro's significant rise towards the 76.4% Fibonacci level at 1.1041.
COT report:
Speculators closed 23,262 long contracts and opened 33,299 short contracts during last reporting week. This means that the bullish sentiment of major players has weakened significantly and is no longer bullish. The total number of long contracts held by speculators is now 207,000, while the number of short contracts amounts to 213,000. The difference between these figures is not considerable. However, bulls do not have an advantage. As for the euro, the sentiment of non-commercial traders has been mostly bullish recently. However, this fact did not favor the euro. The prospects for the euro's growth have been gradually rising over the last few weeks. Nevertheless, the latest COT report shows that the EUR new sell-off is likely. There was no positive news from the Fed or the ECB. Though there were some encouraging signs, they were ignored by the negative news for the euro.
US and EU economic news calendar:
US - Fed Chairman Jerome Powell's speech (13-30 UTC).
On June 22, the EU and US economic news calendars did not contain any entry. However, Powell's speech could significantly affect traders' sentiment. Mr. Powell's stance is likely to remain hawkish.
EUR/USD outlook and recommendations for traders:
I recommended selling the pair at a rebound from the 161.8% level at 1.0574 on the hourly chart with a target of 1.0430. I recommend buying the euro if the pair consolidates above the channel on the 4H chart with a target of 1.1041.