On Wednesday, the EUR/USD pair continues to trade below the corrective level of 50.0% (1.0785), maintaining a good opportunity for a further decline toward the Fibonacci level of 38.2% (1.0726). Suppose the pair manages to establish itself above the level of 1.0785. In that case, traders can expect some growth, while securing above the descending trend corridor will favor the European currency and signal the beginning of an upward movement towards 1.0843 and 1.0917.
The American business activity indices I should have covered yesterday were quite contradictory. The services sector index rose to 55.1, while the manufacturing sector index dropped to 48.5. Thus, the decline of the American currency in the second half of the day was a market reaction to weak business activity in the manufacturing sector. Today's news background will be much weaker, with only the FOMC minutes and Christine Lagarde's speech being noteworthy. The ECB President also gave a speech yesterday.
In an interview, Lagarde stated that most of the path has already been taken, referring to the rate hikes. However, she also pointed out that the ECB intends to continue tightening monetary policy as inflation remains too high. Lagarde noted that the future is uncertain, and many things can go differently than expected. It is worth recalling that last year economists expected a recession in the European, British, and American economies, while expectations have changed to the opposite this year.
It is no longer a secret that the European regulator will continue to raise rates. This is the scenario that traders currently consider as the main one. However, it does not help the euro, as seen on the 4-hour chart. The euro is losing strength almost daily, suggesting the market has already priced the remaining one or two rate hikes. In this case, there are no barriers to the further decline of the European currency.
Today, Lagarde will likely speak again about high inflation and the need to continue tightening policies. These news are unlikely to have an impact on traders' sentiment. And there are no other news events.
On the 4-hour chart, the pair has secured below the ascending trend corridor and the 50.0% correction level at 1.0941, suggesting further decline towards the next corrective level of 38.2% (1.0610). If the quotes establish themselves above the level of 1.0941, it will work in favor of the euro and signal a resumption of growth towards the level of 1.1273. The bullish divergence developing in the MACD indicator has ultimately been canceled.
News calendar for the USA and the European Union:
Germany - IFO Business Climate Index (08:00 UTC).
European Union - ECB President Lagarde Speech (17:45 UTC).
USA - FOMC Minutes Release (18:00 UTC).
On May 25, the economic calendar includes several events. The most important ones are Lagarde's speech and the FOMC minutes. The impact of the news on traders' sentiment in the remaining part of the day can be moderate in strength.
Forecast for EUR/USD and trading advice:
New sales of the pair could be opened upon closing below the level of 1.0785 on the hourly chart, with a target of 1.0726, and currently, these positions can be kept open. I advise buying only after the closure above the descending trend corridor on the hourly chart, with a target of 1.0917.