The EUR/USD pair reversed in favor of the US dollar on Friday, rebounding from the corrective level of 50.0% (1.0864) and then falling below the 1.0810 level. As a result, the pair found itself near the lows of the previous two weeks, which could provide significant resistance to the bears. The price has failed to break the 1.0770 level three times, so an upward trend on Monday and Tuesday is possible. The question is how strong it will be.
Once again, the waves are indicating a "bearish" trend. The recent downward wave easily broke the lows of the last upward wave. However, the chart clearly shows that the movements of recent weeks resemble a horizontal pattern. This is another reason why growth is possible this week. At the same time, there are no signs of a shift from a "bearish" to a "bullish" trend.
Friday was a news-rich day for traders. Several important reports were released in the United States that could have pushed the pair up and down. The bears prevailed, but the information background needed to be more clear-cut. The unemployment rate in August increased from 3.5% to 3.8%. Traders didn't expect it to rise even to 3.6%. The non-farm payrolls in August totaled 187K, slightly above expectations. The ISM business activity index increased to 47.6 points from 46.4. Two out of the three most important reports exceeded expectations. However, the unemployment rate is more critical from my perspective, and it's hard to label the other two indicators as strong.
The number of non-farm jobs created in the non-agricultural sector has been declining for over a year. A slight deviation from the forecast cannot be a reason to buy the dollar actively. The ISM business activity index has been below the 50 level for a long time, and any value below this level is considered negative.
On the 4-hour chart, the pair has established itself above the descending trend corridor, and this development greatly concerns me. It indicates that the trend has shifted to "bullish," but I wouldn't rush to conclusions. The decline could resume; for now, we need to await clarification and refinement of the 4-hour chart's graphical picture. There are no impending divergences observed in any indicator today.
Commitments of Traders (COT) Report:
During the last reporting week, speculators closed 8849 long contracts and opened 3232 short contracts. The sentiment among major traders remains "bullish" overall and isn't weakening too rapidly. The total number of long contracts held by speculators now stands at 230,000, while short contracts amount to 83,000. The situation will continue to shift in the opposite direction over time, but bearish traders are not attacking the bulls too aggressively now. The high value of open long contracts suggests that professional traders may close them soon due to the strong bias towards the bulls. The current figures allow for continuing the euro's decline in the coming weeks. The ECB is increasingly signaling the end of the QE tightening procedure.
Economic Calendar for the US and the Eurozone:
Eurozone - ECB President Lagarde will deliver a speech (13:30 UTC).
Eurozone - A representative from the ECB, Lane, will speak (14:00 UTC).
On September 4th, the economic events calendar contains two important entries. The main focus will be on Lagarde's speech. The impact of the information background on trader sentiment for the remainder of the day may be of moderate strength.
Forecast for EUR/USD and Trading Advice:
Short positions on the hourly chart could have been opened upon closing below 1.0864, with targets at 1.0810 and 1.0744. These trades can now be closed as an upward trend is possible. On the hourly chart, long positions are possible upon closing above the 1.0810 level, with targets at 1.0864 and 1.0917.