The EUR/USD pair continued its decline on Monday towards the level of 1.0533 but stopped halfway and has since started to return to the corrective level of 100.0% (1.0637). A rebound from this level will favor the US currency and a resumption of the decline towards 1.0533. Closing above 1.0637 will allow for expectations of the euro's rise to 1.0697.
The waves still tell us only one thing: a "bearish" trend. Something resembling an upward wave was formed on Thursday and Friday of last week, but I do not consider this movement as a wave. This means a downward wave still forms, with several pauses and stops. Even if we consider the peak of last Friday as the peak of the wave, for a trend reversal to occur, there needs to be an increase to the level of 1.0680. I do not believe such growth is possible today, so the "bearish" trend remains one hundred percent until tomorrow.
Monday's information background was once again not in favor of the euro. Yesterday, I wrote about the speeches of ECB Governing Council members Francois Villeroy de Galhau and Pablo de Cos, and there have been no other news updates today or yesterday. The speech by Philip Lane, which was planned for Tuesday morning, has not yet appeared in the news feeds. However, I believe that Lane will not deviate from the "dovish" ECB stance, as he is still the chief economist. It isn't easy to imagine a situation where all members of the Governing Council support a pause, but the chief economist supports further tightening.
On the 4-hour chart, the pair has made a new drop to the 100.0% Fibonacci level and continues to stay within a descending trend corridor. A rebound from the level of 1.0639 allowed for a slight rise, but I recommend only counting on a significant strengthening of the euro once the price closes above the trend corridor. Closing below 1.0639 increases the chances of continuing the decline towards the corrective level of 127.2% (1.0466). An RSI indicator has formed a "bullish" divergence and then canceled it.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 4,952 long contracts and opened 6,147 short contracts. The sentiment of major traders remains "bullish" but has noticeably weakened in recent weeks and months. The total number of long contracts speculators hold is now 207,000, while short contracts amount to 105,000. The difference is now only twofold. The situation will continue to change in favor of bears over time. Bulls have dominated the market for too long, and now they need strong news to maintain the "bullish" trend. Such news is currently lacking. The high value of open long contracts suggests that professional traders may continue to close them soon. The current numbers allow for a further decline in the euro in the coming months.
News Calendar for the US and the European Union:
USA - Building Permits Issued (12:00 UTC).
USA - CB Consumer Confidence Index (14:00 UTC).
USA - New Home Sales (14:00 UTC).
On September 26, the economic events calendar includes several reports from the USA, but they are only somewhat important. The impact of the information background on traders' sentiment today may be weak.
Forecast for EUR/USD and trader advice:
Selling the pair is possible today in case of a rebound from the level of 1.0637 on the hourly chart, with targets at 1.0575 and 1.0533. Buying can be considered upon closing above the level of 1.0637 on the hourly chart, with targets at 1.0697 and 1.0735.