The EUR/USD pair reversed in favor of the US dollar on Wednesday and fell towards the 1.0080 level. Interestingly, I have recently been pointing to the pair's movement strictly around the 1.0196 level. Even after yesterday's fall, it can still be assumed that the pair is trading near this level, constantly jumping above it and then below it. From my point of view, today, especially closer to the Fed meeting, we can see new growth in the US currency. But until this happens, the euro remains close to 1.0196. It was also possible to build a small descending corridor, which now characterized the mood of traders as "bearish" and passed through all the peaks and lows of the price. However, I don't think the pair will stay in it long. Tonight I am waiting for impulse movements. The market at this time may be crowded with traders, so the activity will increase significantly. Given this fact, it will be difficult for the euro to stay in a sufficiently narrow corridor. However, enough about graphical analysis; it's time to start considering more important things.
With the Fed's interest rate, almost everything is clear. It will be raised by 0.75% with a probability of 80%. However, in addition to the announcement of the result on the rate, there will also be a press conference with Jerome Powell. I already believe that his speech will be more important for traders than the decision on the rate. At the next meeting, Powell will have to answer one essential question: at what pace will the Fed tighten monetary policy at the next meeting? After all, the regulator will not be able to raise the rate by 0.75% at every next meeting. There should be a slowdown, but when will it start, and how strong will it be? His comments on inflation and the state of the American economy are also important. Can inflation continue to rise further, or does Powell believe that peak values have now been reached? What about the recession? The answers to these questions can affect the mood of traders more than the news of a rate increase.
On the 4-hour chart, the pair reversed in favor of the US dollar and anchored under the correction level of 127.2% (1.0173). Thus, the fall in quotes can now be continued in the direction of the next Fibo level of 161.8% (0.9581). In the last 6-7 days, the euro has been moving mostly horizontally, but the situation may change this evening. We still have a downward trend corridor, which characterizes the mood of traders as "bearish," and there are no brewing divergences today.Commitments of Traders (COT) Report:
Last reporting week, speculators closed 1,365 long contracts and opened 16,136 short contracts. This means that the "bearish" mood of the major players has intensified again. The total number of Long contracts concentrated in the hands of speculators now amounts to 238 thousand, and short contracts – 195 thousand. The difference between these figures is still not too big, but it remains not in favor of the bulls. In the last few weeks, the chances of a rise in the euro currency have been gradually increasing, but recent COT reports have shown that new sales may now follow, as the mood of speculators has changed from "bullish" to "bearish," and it is intensifying. Thus, it is still difficult for me to count on the strong growth of the euro currency.
News calendar for the USA and the European Union:
US - basic orders for durable goods (12:30 UTC).
US - Fed interest rate decision (18:00 UTC).
US - FOMC press conference (18:30 UTC).
On July 27, the calendar of economic events of the European Union is empty. In addition to the Fed meeting, a report on orders for durable goods will be released in the United States. Right now, traders are not actively trading, so this report may affect their mood.
EUR/USD forecast and recommendations to traders:
I recommended new sales of the pair when closing below the level of 1.0173 on the 4-hour chart with targets of 1.0080 and 0.9963. Now, these deals can be kept open. I recommend buying the euro currency when anchoring above the corridor on a 4-hour chart with a target of 1.0638.