Immediately after yesterday's review, the EUR/USD pair on Thursday fell to the level of 1.0080. It broke through and continues to fall towards the next corrective level of 323.6% (0.9963). Many economists and traders are now guessing what caused such a sharp drop in the euro currency, but, from my point of view, everything is banal. On the 4-hour chart, the downward trend corridor remained, although the pair tried to consolidate above it. Thus, the "bearish" mood of traders remained, and once it was impossible to gain a foothold above the corridor and start growth, the fall should have resumed. It resumed; for this, traders did not need an information background since nothing interesting happened in the USA and the European Union yesterday or today. The inflation report for July cannot be considered important since there are two values for each month. The first and final. Traders, as a rule, react to the first, and the final, as a rule, coincides with the first. But in any case, there was no reaction from traders yesterday immediately after this report. It would be strange to think that they waited a few hours and only then began to get rid of the European currency.
Now the euro currency can return to 1.0000, which is of great psychological importance, and continue to fall far below this level. From my point of view, this is the most logical outcome for the euro currency since I have said many times that the passivity of the European Central Bank could not pass without a trace for the euro currency. Even two interest rate increases of 0.50% will not play a role in the prospects of the euro currency. The Fed is ahead of the ECB in terms of the size of the rate, the pace of its increase, and the volume of the quantitative tightening program (which is very simple because there is no quantitative tightening program in Europe). Therefore, the dollar may feel great until the Fed approaches the maximum possible rate and begins to send clear signals about its readiness to stop tightening monetary policy.
On the 4-hour chart, the pair reversed in favor of the US currency and anchored under the corrective level of 127.2% (1.0173). The pair failed to consolidate over the descending trend corridor, so it continues to characterize the current mood of traders as "bearish." The process of falling can be continued in the direction of the Fibo level of 161.8% (0.9581), and the consolidation under the side corridor did not take long to wait. Emerging divergences are not observed in any indicator today.
Commitments of Traders (COT) Report:
Last reporting week, speculators opened 8,396 long contracts and 4,121 short contracts. It means that the "bearish" mood of the major players has become a little weaker, but it has remained. The total number of long contracts concentrated in the hands of speculators is now 200 thousand, and short contracts – 234 thousand. The difference between these figures is still not too big, but it remains not in favor of euro bulls. In the last few weeks, the chances of the euro currency's growth have been gradually growing, but recent COT reports have shown no strong strengthening of the bulls' positions. The euro currency has not been able to show convincing growth in the last five weeks. Thus, it is still difficult for me to count on the strong growth of the euro currency. So far, I am inclined to resume the fall of the euro/dollar pair.
News calendar for the USA and the European Union:
On August 19, the calendars of economic events of the European Union and the United States do not contain a single interesting entry. The influence of the information background on the mood of traders will be absent today.
EUR/USD forecast and recommendations to traders:
I recommended new sales of the pair when anchoring under the 1.0196 level on the hourly chart with a target of 1.0080. This level has been reached. Now you can sell with a target of 0.9963. I recommend buying the euro currency when fixing quotes above the descending corridor on the 4-hour chart with a target of 1.0638.