On Thursday, the EUR/USD pair rebounded from the level of 1.0637, marking a reversal in favor of the US dollar and a sharp decline below the corrective level of 161.8% (1.0561). The sustained quotes below this level allow us to anticipate further decline towards the next level at 1.0489. A close above 1.0561 today would lead to expectations of a swift return of the euro currency to the 1.0637 level. At this time, traders' sentiment cannot be described as "bullish."
The wave situation has been clarified and immediately complicated. Yesterday's decline in the pair (as it might seem) changed the trend to "bearish." However, take a closer look at the chart: the low of the last downward wave from October 9th has not been breached. Accordingly, if the pair resumes its upward movement to the 1.0637 level today, there will be no signs of a trend change to "bearish." At the moment, there is no basis to claim that the bears have taken the initiative.
The information background on the previous day consisted of a report on US inflation, as all other reports had no influence on traders' sentiment. In the European Union, there were no reports at all. However, the market unexpectedly remembered the FOMC protocol, also known as the "FOMC Minutes," which was released on Wednesday evening. It was remembered, but it was so uninteresting that it wasn't clear what to do with it. I can highlight only one phrase from the protocol: the majority of committee members support another rate hike. In my view, yesterday's rally might be more associated with this statement than with inflation, which remained at 3.7% in September.
On the 4-hour chart, the pair rebounded from the corrective level of 100.0% (1.0639), marking a reversal in favor of the US dollar, and began a process of decline towards the 127.2% Fibonacci level at 1.0466 after the formation of a bearish divergence in the CCI indicator. Today, the same indicator shows a potential bullish divergence, which could allow the pair to reverse back to the 1.0639 level. There are plenty of signals on both charts right now, and they are diverse: down, up. The market situation has become quite complex and not straightforward.
Commitments of Traders (COT) Report:
In the last reporting week, speculators opened 267 long contracts and 19,723 short contracts. The sentiment of large traders remains "bullish," but it has notably weakened in recent weeks and months. The total number of long contracts held by speculators is now 211,000, while short contracts amount to 133,000. The difference is now less than double, although a few months ago, the gap was threefold. I believe the situation will continue to shift in favor of the bears. Bulls have dominated the market for too long, and now they need a strong information background to initiate a new "bullish" trend. Such a background is currently lacking. Professional traders may continue to close their long positions in the near future. I believe the current figures allow for a further decline in the Euro currency in the coming months.
News Calendar for the US and the European Union:
European Union – Industrial Production (09:00 UTC).
European Union – ECB President Lagarde will deliver a speech (13:00 UTC).
US – University of Michigan Consumer Sentiment Index (14:00 UTC).
On October 13th, the economic events calendar includes several entries, with Christine Lagarde's speech being the highlight. The impact of the information background on traders' sentiment today may have moderate strength.
EUR/USD Forecast and Trading Advice:
Sales of the pair were possible upon closing below the hourly chart's trend corridor, with targets at 1.0561 and 1.0525. These positions can be kept open until they close above 1.0561. I recommend buying today upon closing above the level of 1.0561 on the hourly chart, with a target at 1.0637.