Hello, dear traders! On Monday, the EUR/USD pair first rose by more than 100 pips but then collapsed. Given that its dynamic was mixed, the pair closed at the opening price. Thus, despite an active Tuesday, the situation has barely changed. The pair's further upside potential is limited by four bounces from 1.0430, the 200% retracement level. At the same time, fundamental factors are too chaotic, and it is extremely difficult for traders to interpret them unambiguously. Let's try to figure out what is going on.
First of all, let me remind you that the current downward cycle of the US currency began amid rumors that the Fed might start to slow down the pace of monetary tightening. The European currency rose by almost 1,000 pips on the fact that the Fed was going to soften its tone. In fact, the Fed continues to tighten policy at the highest pace - 0.75% at each meeting. In my opinion, this is already a clear discrepancy between the real facts and their interpretation by traders.
The ECB also began raising rates by 75 basis points at each meeting, but much later than the Fed. Thus, although the euro advanced by 1,000 pips, there are no reasons why it is likely to continue this rally. There has been talk lately that the Bank of England and the ECB will also slow down the pace of policy tightening, although inflation in their countries has not even shown signs of cooling yet. Everyone has already got used to the fact that the situation now depends on the inflation rate. However, the US can boast a decline in consumer price growth for four months in a row, unlike the European Union and Britain. At the same time, both central banks could follow the Fed and temper the pace of policy tightening. I believe that this factor can contribute to fresh gains in the dollar. Jerome Powell will give a speech this week. In addition, this week's macroeconomic calendar includes data on payrolls for November. These reports may well support the US dollar.
According to the 4-hour chart, the pair consolidated above the 127.2% retracement level - 1.0173. Thus, it is likely to head towards the next Fibonacci level of 100.0% - 1.0638. If the price fixes below 1.0173, the US currency will gain value. In this case, the pair is expected to slide to the retracement level of 161.8% - 0.9581. Technical indicators show that there are no emerging divergences today.
Commitments of Traders (COT) report:
Last week, speculators opened 7,052 long contracts and 1,985 short contracts. This means that the mood of major traders is mainly bullish. The total number of long contracts is now 239,000, and that of short contracts is 126,000. For the first time in a long period, I can say that the European currency is growing, which is in line with the COT reports. Over the past few weeks, the likelihood of the euro's rally has increased. However, traders were not ready to get rid of the US dollar. Now the situation is changing in favor of the euro, but this may take time. Also, let me note a descending corridor on the 4-hour chart, above which the price has still managed to close. Therefore, the euro is expected to extend gains, which contradicts a bit to the current fundamental factors.
News calendar for US and EU:
On November 29, the macroeconomic calendar is bereft of any important releases from the European Union and the United States.
EUR/USD forecast and trading tips:
On the hourly chart, I recommend selling the pair on rebounds from 1.0430 with a view to reaching the target levels of 1.0315 and 1.0197. Long positions on the euro will be relevant in case of a rebound from the level of 1.0173 on the 4-hour chart. In this case, the levels of 1.0315 and 1.0430 can be seen as targets.