Hello, dear traders! EUR/USD was bearish on Wednesday. The price consolidated below the 323.6% retracement level of 0.9963. It is now approaching the mark of 0.9782. The fall began yesterday morning when the news broke that Russia announced partial mobilization. This puts an end to the imminent resolution of the Ukrainian-Russian conflict. An increase in the risk-averse sentiment was followed by a decline in the euro and the pound. In addition, the Fed announced a 0.75 rate hike yesterday. Moreover, Jerome Powell said at a press conference that the regulator was bracing itself for a few more big rate hikes. So, the US central bank could bring the interest rate to 4.5% by lifting it by 0.75% and 0.50% at the remaining two meetings. Generally speaking, the Fed was extremely hawkish yesterday.
The euro showed modest growth after the meeting but then plunged again. EUR/USD is now trading 200 pips below parity and is highly unlikely to show growth any time soon. Meanwhile, the ECB announced a 0.75% rate increase two weeks ago. However, its decision was not enough to support the euro. Geopolitical woes are now weighing on the currency, and the more the situation deteriorates, the deeper the euro will plunge. The Kremlin is now preparing to hold a referendum in four controlled areas of Ukraine on joining Russia. If Russia annexes these regions, and Ukraine attempts to take them back, Moscow may threaten a nuclear attack by claiming to defend its own territories. The market senses it quite strongly. Therefore, it is now turning away from the risk.
On the 4-hour chart, EUR/USD pulled back from the 127.2% retracement level of 1.0173. The pair is now heading towards the 161.8% retracement level of 0.9581. The price is moving in a descending corridor, indicating a bearish bias in the market. If the quote closes above the corridor, sentiment may turn bullish in the long term. However, its latest attempt to do this failed.
Commitments of Traders (COT):
Last week, speculators opened 2,501 long positions and closed 22,011 short positions, which reflects a decrease in the bearish sentiment in the market. The number of long and short positions now totals 207,000 and 219,000 respectively. Although the gap between them is narrowing, the euro is still moving in the downtrend. Bulls are now reluctant to buy the currency because the euro was unable to show steep growth in the past few months. In this light, the focus now should be on the important descending corridor on the 4-hour chart because the euro may rise if the quote closes above it.
Macro event in the United States and the European Union:
United States: Initial Jobless Claims (12-30 UTC)
On September 22, no macro reports are set to be released in the European Union. Meanwhile, in the United States, only one report will be published but it will unlikely be of any interest to traders. Overall, fundamentals will have little influence on the market today.
Outlook for EUR/USD:
Selling of EUR/USD will become possible if the price pulls back from 1.0173 (1.0196) on the 4-hour chart, with the target at 0,9900. Currently, short positions could be held with the targets at 0.9782 and 0.9581. Meanwhile, long positions could be considered after consolidation above 1.0173 on the 4-hour chart, with the target at 1.0638.