Hi, dear traders! On Monday, the EUR/USD pair fell to the correction level of 50.0% – 1.0918. A rebound from this level will work in favor of the European currency. So, EUR/USD could resume growth in the direction of the Fibonacci level of 61.8% – 1.0970. If the price settles below the level of 1.0918, this will also mean fixing under the uptrend channel. In this case, trading sentiment will change to bearish. I expect a fall in the direction of the correction level of 38.2% at 1.0866.
The situation with the waves remains quite clear. The last completed ascending wave broke through the peak of the previous wave (from February 12) in confidence. The last descending wave did not even approach the previous low. Thus, at this time, EUR/USD has been following a bullish trend and there is not a single wave sign of its completion. A new upward wave managed to break through the peak of February 22 and it is still in progress. As a result, I expect a stronger attack of bulls in the near future, which is already underway now. Despite the weak support from the information background, the bulls continue to attack. The only possible sign of a change in the trend to bearish today may be a close under the ascending corridor.
There was no information background on Monday, and traders' activity was very low. Today, most likely, the situation will be the opposite. In the morning, an inflation report had already been released in Germany, but traders took no notice on it. However, the consumer price index fell to 2.5% in February. In the afternoon, the US consumer price report will be released, which is much more important. Traders expect inflation to remain at 3.1%, while core inflation might decline to 3.7%. If actual CPIs are higher, bearish traders will have the opportunity to launch a counterattack. High inflation will mean that the Federal Reserve may still be on pause when it comes to rate cuts.
On the 4-hour chart, EUR/USD rose to the corrective level of 61.8% – 1.0959. A rebound in from the level of 1.0959 will work in favor of the US currency and enable a fall towards 1.0862. If the price settles above the level of 1.0959, this will increase the chances of further growth towards the next Fibonacci level of 76.4% – 1.1081. An ascending trend corridor at this time characterizes trading sentiment as bullish. Only a close below it will indicate that the bears may launch a large-scale counter-offensive. Bearish divergence in the CCI indicator increases the likelihood of a reversal in favor of the dollar.
Commitments of Traders (COT)
In the last reporting week, speculators closed 5,209 long contracts and 8,666 short contracts. The non-commercial group's sentiment remains bullish, but continues to weaken. The total number of long contracts is now 200K whereas short contracts equal 133K. I still believe that the situation will continue to change in favor of the bears. The bulls have dominated the market for too long. Now they need a strong information background to maintain the bullish trend. Now I don't see that. At the same time, the total number of open long positions is less than the number of short positions (625K versus 656K). But this balance of power has been observed for quite some time.
Economic calendar for US and EU
EU: Germany's consumer price index due at 07-00 UTC
US: consumer price index due at 12-30 UTC
On March 12, the economic calendar contains two reports. The US inflation data certainly stands out. The influence of the information background on market sentiment in the afternoon can be considerable.
Outlook and trading tips on EUR/USD
Traders may consider short positions on EUR/USD on the condition of a rebound from 1.0959 on the 4-hour chart with targets at 1.0918 and 1.0866. We can also go short when the instrument closes on the 1-hour chart under an ascending corridor with a target of 1.0801. Buying positions would be relevant if EUR/USD consolidated above 1.0862 on the 4-hour chart with a target of 1.0932. The target has been already hit. Traders may open new long positions when the instrument closes above 1.0959 with a target of 1.1081.