Hi everyone! The EUR/USD pair fell on Thursday and consolidated below 1.0917, the Fibonacci correction level of 1.0966. On Tuesday, it slid below the uptrend corridor and the level of 1.0917 - the Fibonacci correction level of 76.4%. Today, the pair has declined to 1.0843, the Fibo level of 61.8%. The downward movement is quite rapid. A rebound from 1.0843 will help the euro recover and approach 1.0917. Closing at 1.0843 will increase the likelihood of a fall to 1.0784, the Fibonacci correction level of 50.0%. Market sentiment has become bearish.
Yesterday, there was no crucial news or events for the euro as traders anticipated the BoE meeting. The results of the meeting caused volatility in markets. The euro remained unchanged. However, in the morning, negative PMI Indices significantly impacted the euro, while the pound sterling was stuck in the same range. The Manufacturing PMI Indices for Germany and the EU contracted to 40. In June, the Manufacturing PMI Index for Germany fell to 41, which was much lower than expected. In the European Union, the reading totaled 43.6, which was below market expectations. The Services PMI Indices also slid. In Germany, the indicator tumbled to 54.1 from 57.2. In the EU, it dropped to 52.4 from 55.1.
These figures indicate that the economy has started slowing down due to the ECB's aggressive tightening. If earlier GDP decreased slightly, now it may dip markedly. It could force the regulator to take a break in tightening after the July meeting. This is the main reason why the euro is falling.
On the 4H chart, the pair declined below 1.0941, the Fibonacci correction level of 50.0%. It is likely to fall to 1.0610, the Fibo level of 38.2%. No divergences are seen in any indicator today.
Commitments of Traders:
In the last reporting week, speculators closed 9,922 long positions and 3,323 short ones. The mood of large traders remains bullish but is slowly weakening. The total number of long positions now amounts to 2,260, and short contracts – only to 74,000. The bullish trend prevails. However, the situation may change in the near future. The euro has been declining a little more often for the last two months than it has been growing. The large volume of long open positions suggests that buyers may start closing them in the near future (or have already started as indicated by the latest COT reports). The bullish bias is too strong at the moment. I believe that the current figures signal a new fall in the euro in the near future.
Economic calendar for US and EU:
EU– Germany's Manufacturing PMI Index (07:30 UTC).
EU – Germany's Services PIN Index (07:30 UTC).
EU – Germany's Composite PMI Index (07:30 UTC).
EU– Manufacturing PMI Index (08:00 UTC).
EU– Services PMI Index (08:00 UTC).
EU – Composite PMI Index (08:00 UTC).
US – Manufacturing PMI Index (13:45 UTC).
US – Services PMI Index (13:45 UTC).
US – Composite PMI Index (13:45 UTC).
On June 23, the economic calendar includes many PMI Indices reports. Traders have already studied six reports. The impact of fundamental background on market sentiment may remain high today.
Outlook for EUR/USD and trading recommendations:
I advised you to go short if the pair closed below the trend line on the 1H chart with the target level of 1.0843. The pair has already reached this level. You could sell the pair if it closes below this level with targets of 1.0784 and 1.0726. I do not recommend buying the pair today.