The EUR/USD pair experienced a drop to the corrective level of 76.4% (1.0917) on Wednesday, a rebound from it, a reversal in favor of the European currency, and some growth towards the 1.1000 level. The growth stopped quickly, and the movement has been mostly horizontal in the past few days. I expect a further decline of the pair toward the Fibonacci level of 61.8% (1.0843), for which a rebound from the 1.1000 level or a close below 1.0917 is needed.
At first glance, the background information on Wednesday seemed strong enough, but it was not. The March inflation report for the European Union did not interest traders, as its value coincided with their expectations and the first estimate of 6.9% y/y. Thus, the consumer price index showed a record slowdown, and this moment (although it did not cause a reaction from traders) is the most important, even crucial. The interest rate policy of the Federal Reserve and the Bank of England is now clear. Both central banks have reduced their rate hike pace to 0.25%, and only the ECB has been sending various signals in recent weeks that the decision has yet to be made, and the rate could increase by 0.50% at the next meeting. However, after yesterday's inflation report, the ECB will follow the example of its American and British counterparts and reduce the rate hike pace to 0.25%. The weakening of the ECB's monetary-credit stance may adversely affect the European currency, which has been experiencing serious growth problems in recent weeks. Bullish traders remain in the market in their previous numbers but cannot find new grounds for increasing long positions. Thus, bears may gradually start pulling the rope to their side. The European currency has fewer and fewer growth factors day by day.
On the 4-hour chart, the pair consolidated above the sideways corridor, allowing for the continuation of growth in the direction of the corrective level of 61.8% (1.1273). Consolidation above the corrective level of 50.0% (1.0941) was also successful, increasing the chances of further growth. The "bullish" divergence at the CCI indicator similarly favored the euro. No new emerging divergences have been observed yet.
The Commitments of Traders (COT) report:
During the last reporting week, speculators opened 18,764 long contracts and closed 1,181 short contracts. The mood of major traders remains "bullish" and continues to strengthen overall. The total number of long contracts held by speculators now stands at 244,000, while short contracts amount to 81,000. The European currency has been growing for over half a year, but the information background is starting to change, which could lead to a drop in the EU currency. The ECB may reduce the rate hike pace to 0.25% at its next meeting, which could lead to a decline in demand for the euro. The threefold difference between long and short contracts suggests that the moment when bears are activated is close. The strong "bullish" sentiment persists for now, but I think the situation will start changing soon.
News calendar for the US and the European Union:
EU - publication of the ECB monetary policy meeting minutes (11:30 UTC).
US - Philadelphia Fed manufacturing activity index (12:30 UTC).
US - initial jobless claims (12:30 UTC).
On April 20, the economic events calendar contains three entries, each with extremely low chances of being reflected on the charts. The influence of the background information on traders' sentiment today may be weak.
EUR/USD forecast and trading tips:
New short positions for the pair can be opened when bouncing off the 1.1000 level on the hourly chart with a target of 1.0917. Or when closing below 1.0917 with a target of 1.0843. Long positions for the pair were possible when bouncing off the 1.0917 level with a target of 1.1000. This trade can now be closed.