On Monday, the EUR/USD pair performed the fifth consecutive rebound from the corrective level of 323.6% (0.9963), a reversal in favor of the European currency and a slight increase towards the level of 1.0080. As I said yesterday, the growth did not turn out to be strong, only about 80 pips. Today, on Tuesday, a reversal has already been made, and it looks like the pair's quotes will very quickly return to the level of 0.9963 to test it for the sixth time. As before, the rebound will allow us to expect an increase of 70–80 points and the consolidation of the sub-fall in the direction of the level of 0.9782. In addition to the lack of movements on Monday and Tuesday, there is also no background information. These two days' first and only event will be Christine Lagarde's speech late tonight. Thus, it will not affect the mood of traders during the day. However, I would like to note that the trend movement can resume at any moment since tomorrow traders will be acquainted with the results of the Fed meeting. This event is as important as the inflation report and even more important.
Let me remind you that most experts agree that the rate will increase by 0.75%. I would say that this increase has already been considered in the current rate of the euro/dollar pair and other instruments. Nevertheless, an increase of 1.00% cannot be completely ruled out, and we should not forget about the press conference with Jerome Powell. He can provide so much interesting information that traders cannot help but answer. The dollar has a great reason to grow as long as the Fed raises interest rates. Thus, it is in the hands of the FOMC, and any hints on the timing of continued tightening of monetary policy will help traders understand how much longer the US currency can grow. It also matters to what level the bid will eventually rise. The weighted average forecast is 4%, but I think the rate may rise much higher since the Fed has seriously taken up the goal of lowering inflation to 2%.
On the 4-hour chart, the pair rebounded from the corrective level of 127.2% (1.0173), a reversal in favor of the US currency, and began to fall towards the corrective level of 161.8% (0.9581). The downward trend corridor continues to characterize the mood of traders as "bearish." Another attempt to close the pair's rate above the corridor can change the mood of traders to "bullish" for a long time, but it failed.
Commitments of Traders (COT) Report:
Last reporting week, speculators opened 2,501 long contracts and closed 2,2011 short contracts. This means that the "bearish" mood of the major players has weakened, and the total number of long contracts concentrated in the hands of speculators now amounts to 207 thousand, and short contracts – 219 thousand. The difference between these figures is shrinking, but the European currency continues to fall. In the last few weeks, the chances of the euro currency's growth have been gradually increasing, but bull traders are not willing to buy euros yet. The euro currency has not been able to show strong growth in the last few months. Therefore, I would now bet on an important downward trend corridor on a 4-hour chart. I recommend expecting the growth of the European currency after the closing of quotations above it.
News calendar for the USA and the European Union:
EU – Christine Lagarde's speech (20:00 UTC).
On September 20, the calendars of economic events of the European Union and the United States contain almost no interesting entries. It was only late in the evening that Christine Lagarde gave a speech. The influence of the information background on the mood of traders during the day will be absent.
EUR/USD forecast and recommendations to traders:
I recommended selling the pair when rebounding from the level of 1.0173 (1.0196) on the 4-hour chart with a target of 0.9900. Now, these positions can be held or closed at will. I recommend buying the euro currency when fixing quotes above the level of 1.0173 on a 4-hour chart with a target of 1.0638.