On Thursday, the EUR/USD pair reversed in favor of the US dollar and resumed its decline, even though it closed above the descending trend corridor. This can be attributed to Christine Lagarde's speech, which will be discussed below. Without that, the euro's upward movement could have continued, as certain factors and indicators favored it. Currently, the pair's quotes have closed below the Fibonacci level of 76.4% (1.0984), indicating expectations of further decline toward the levels of 1.0917 and 1.0864.
The waves still signal a "bearish" trend. The previous upward wave was considerable, but no signs indicate the completion of the "bearish" trend. The new downward wave broke through the last low, confirming the ongoing dominance of bearish traders. This is due to the ECB meeting and Christine Lagarde's remarks about a possible pause in further monetary policy tightening in September. With this factor, the dollar might have gained such strength.
ECB President Lagarde's stance yesterday lacked firmness, falling short of market expectations for stronger rhetoric. Inflation in the Eurozone remains high, and core inflation remains relatively stable. In such circumstances, Lagarde was expected to pledge rate increases at all fall meetings. However, she allowed for a pause in September and stated that rate decisions would be made meeting by meeting. The market interpreted these words as a soft approach from the ECB, showing reluctance to fight inflation to the end, which led to renewed selling of the euro.
On the 4-hour chart, the pair rebounded from the Fibonacci retracement level of 100.0% (1.1030), but the upward movement has already ended. The pair reversed in favor of the US currency and is now heading toward the ascending trendline. A rebound from it may lead to some growth towards the 1.1030 level or slightly above. However, it is unlikely that this rebound will continue the "bullish" trend. A close below the trendline will support the continuation of the decline in quotes.
Commitments of Traders (COT) Report:
During the last reporting week, speculators opened 40,163 long contracts and 1,493 short contracts. The sentiment among major traders remains "bullish" and has strengthened once again. The total number of long contracts speculators hold is 264,000, while short contracts amount to only 85,000. The "bullish" sentiment persists, but I believe the situation may soon change in the opposite direction. The high number of open long contracts indicates buyers may begin closing them soon, as there is a significant imbalance in favor of the bulls. Considering the significant rise two weeks ago, I anticipate a decline in the euro in the coming weeks.
News calendar for the US and the Eurozone:
European Union - Germany's GDP in the second quarter (08:00 UTC).
European Union - Consumer Price Index (CPI) in Germany (12:00 UTC).
USA - Core Personal Consumption Expenditures Price Index (12:30 UTC).
USA - Personal Income and Outlays (12:30 UTC).
USA - University of Michigan Consumer Sentiment Index (14:00 UTC).
The economic events calendar on July 28 includes several significant items for the European Union and the USA. Germany's GDP for the second quarter was already published and fell short of expectations, resulting in a new decline in the euro. The impact of the information background on traders' sentiment for the remainder of the day will likely be moderate.
Forecast for EUR/USD and trader advice:
Today, there were opportunities for selling the pair if it rebounded or closed below the level of 1.0984 on the hourly chart, with targets at 1.0917 and 1.0864. On the other hand, buying the pair is feasible if there is a rebound from the trendline on the 4-hour chart, with targets at 1.1030 and 1.1092.