On Tuesday, the EUR/USD pair executed a reversal in favor of the US dollar, dropping to the levels of last Monday's opening. The ascending trend corridor continues to characterize traders' sentiment as "bullish." If the quotes remain below this corridor, it will favor the US currency and cause the formation of a new "bearish" trend. A rebound from the lower boundary of the corridor will allow traders to expect a new upward movement towards the levels of 1.0637 and 1.0690.
The wave situation was clarified at the end of last week and at the beginning of the current one. The last upward wave broke the peak of the previous wave, which means that we are once again discussing the formation of a "bullish" trend. To speak of a "bearish" trend, the pair needs to break the last low at 1.0566 or have the new upward wave fail to surpass the last peak at 1.0690. At this time, there are no signs of the "bullish" trend's completion.
Tuesday turned out to be quite interesting in terms of economic news. We learned that business activity in the manufacturing sector of Germany increased slightly (40.7), while in the services sector, it continued to decline (48.0). Business activity in the EU's manufacturing sector dropped to 43, and in the services sector, it fell to 47.8. The decrease in all these indicators wasn't significant, but it was still another drop. Bullish traders didn't get the support of the news background, and it was quite reasonable for them to withdraw from the market. As a result, the pair dropped by almost 100 points.
Tomorrow, the ECB will announce the results of the penultimate meeting of this year, and "hawkish" decisions are not expected right now. There is a faint hope for Christine Lagarde and her speech, but the European Union's economy continues to experience challenging times, economic growth is nearly absent, and business activity keeps declining. In such conditions, it is very difficult to expect further tightening of monetary policy.
On the 4-hour chart, the pair has secured itself below the corrective level of 100.0% (1.0639), which allows for expectations of a decline towards the lower boundary of the ascending trend corridor. Closing below this corridor will change traders' sentiment to "bearish," and then one can expect a more significant drop towards the Fibonacci level of 127.2% at 1.0466. A rebound from the lower boundary of the corridor will allow the bulls to become active once again.
Commitments of Traders (COT) Report:
In the last reporting week, speculators opened 6,791 long contracts and closed 87 short contracts. The sentiment among major traders remains "bullish," but it has significantly weakened in recent weeks and months. The total number of long contracts held by speculators now stands at 214,000, while short contracts amount to 132,000. The difference is now less than double, whereas a few months ago, the gap was three times larger. I believe that 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 news 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 think the current numbers allow for a continuation of the euro's decline in the coming months.
News Calendar for the USA and the European Union:
USA - Building Permits (12:00 UTC).
USA - New Home Sales (14:00 UTC).
USA - Speech by Fed Chair Mr. Powell (20:35 UTC).
On October 25, the economic events calendar doesn't include many interesting entries. The most important event is Powell's speech. The impact of the news on traders' sentiment throughout the day on Wednesday may be weak.
EUR/USD Forecast and Trader Recommendations:
Today, buying the pair is possible when there is a rebound on the hourly chart from the lower boundary of the corridor or the level of 1.0561, with targets at 1.0637 and 1.0690. Sales can be considered if there is a breakout below the corridor with a target of 1.0489.