The EUR/USD pair on Wednesday executed a new rise and consolidated above the corrective level of 100.0% (1.1172). Thus, the rise in quotes can continue further toward the 1.1172 level. A rebound in quotes from this level will favor the American currency and a certain fall toward the 1.1172 level. Consolidation above it will increase the likelihood of continued growth towards the next Fibonacci level of 127.2% (1.1216).
The waves now tell us only one thing: the "bullish" trend continues. Each new peak is higher than the previous one, and each new low is higher than the previous one. There are no prerequisites for the end of the "bullish" trend. Yesterday, its continuation was greatly aided by the US inflation report, which fell not to 3.1% y/y but to 3%. The difference is small, but it is worth considering the inflation value in the previous month, which was 4%. Thus, in just one month, inflation fell by a whole percent. Since there is only 1% left to the target inflation level set by the Fed, the market decided it would not see two rate hikes this year. Some members of the FOMC have recently been hinting at a very likely rate hike to 5.75% this year to counter high prices. However, the lower inflation falls, the less need for additional tightening.
Traders did not pay due attention to the second report – on core inflation, which also fell but was much higher than the main indicator. 4.8% - such is the result for June. In my opinion, we will see another rate hike in July (control). But this information does not impress the market, and the dollar has fallen into the abyss for several days.
On the 4-hour chart, the pair has consolidated above the Fibonacci level of 100.0% (1.1097). Thus, the growth process can be continued toward the next corrective level of 127.2% (1.1221). As I have already said, traders are not paying attention to the Fed's "hawkish" rhetoric and many other reports. But the euro is growing, and there are no graphic signals for a reversal. The CCI indicator had a looming "bearish" divergence but was canceled after yesterday's pair growth.
Commitments of Traders (COT) report:
In the last reporting week, speculators closed 2,705 long contracts and 514 short contracts. The sentiment among large traders remains "bullish," but it is slowly weakening. The total number of long contracts held by speculators now stands at 221 thousand, with short contracts amounting to just 78 thousand. The "bullish" sentiment persists, but I think the situation will continue to shift in the opposite direction soon. Over the past two months, the European currency has been decreasing more often than increasing. The high number of open long contracts suggests that buyers might start closing them soon (or have already started, as indicated by recent COT reports) - the bias toward bulls is currently too strong. The current figures allow for a new fall in the euro soon.
News calendar for the US and European Union:
European Union - Industrial production volume (09:00 UTC).
European Union - Publication of ECB monetary policy meeting minutes (11:30 UTC).
US - Producer Price Index (PPI) (12:30 UTC).
US - Initial jobless claims (12:30 UTC).
The economic events calendar for July 13 contains four entries. All of them are of medium importance, so the impact of the news background on traders' sentiment for the rest of the day could be moderate.
EUR/USD forecast and trading advice:
Small sales are possible upon a rebound from the 1.1172 level on the hourly chart, aiming for 1.1092. The trend is currently "bullish," so a strong pair decline should not be expected. After closing above the trend line on the 4-hour chart, I advised purchasing the pair, and all targets were met. New purchases are possible upon a rebound from the 1.1092 level on the hourly chart with targets of 1.1172 and 1.1216.