On Friday, the EUR/USD pair experienced a decline to the lower line of the ascending trend channel. It did not reach the boundary, there was a reversal in favor of the European currency, and the bullish sentiment among traders persisted. The price is still trading inside the channel. Only consolidation below the channel will be considered as the end of the bull dominance period, and I will expect a resumption of the euro's decline towards the 127.2% Fibonacci retracement level at 1.0619 and below.
The wave situation remains unchanged. The last completed downward wave broke the low of the previous wave (from April 2), and the new upward wave is still too weak to break the last peak from April 9. Thus, we are dealing with a "bearish" trend, and there is currently no sign of its completion. For such a sign to appear, the new upward wave needs to break the peak of the previous wave (from April 9). If the next downward wave fails to break the last low from April 16, this will also be a sign of a trend change to "bullish." Until then, the bears will maintain their advantage.
The information background on Friday was interesting. The most important Personal Consumption Expenditures Price Index, which is of great importance to the Fed, showed an acceleration of 0.3% m/m. Traders were expecting exactly this value. Less important reports on personal income and spending also did not surprise traders much. Personal income rose by 0.5%, and personal spending rose by 0.8%, which generally corresponded to forecasts. Only the University of Michigan Consumer Sentiment Index showed a negative trend and decreased to 77.2. However, in my opinion, this index is not so important to draw any loud conclusions from it. Despite the fact that last week's American reports did not show the strength expected from them, the American economy is still strong, and the Fed does not plan to introduce a more accommodating policy in the near future.
On the 4-hour chart, the pair rebounded from the 23.6% Fibonacci retracement level at 1.0644 after the formation of two bullish divergences on the CCI indicator and the RSI indicator dropping below 20. Thus, a reversal in favor of the European currency occurred, and the growth process began towards the 38.2% Fibonacci retracement level at 1.0765. A bearish divergence is forming on the CCI indicator, which may put an end to the euro's rise at this time. A rebound of quotes from the level of 1.0765 will favor the US dollar and resume the decline towards the 0.0% Fibonacci level at 1.0450.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 11616 long contracts and opened 10597 short contracts. The sentiment of the "Non-commercial" group has become "bearish" and is rapidly strengthening. The total number of long contracts held by speculators now stands at 167 thousand, while short contracts amount to 177 thousand. I still believe that the situation will continue to change in favor of bears. In the second column, we see that the number of short positions has increased from 92 thousand to 177 thousand over the past 3 months. During the same period, the number of long positions decreased from 211 thousand to 167 thousand. Bulls have dominated the market for too long, and now they need strong informational support to resume the bullish trend. However, the information background has been more supportive of bears lately.
News calendar for the USA and the European Union:
European Union - Consumer Price Index in Germany (12:00 UTC).
On April 29, the economic events calendar contains only one entry, but it is quite important. The impact of the information background on traders' sentiment today may be moderate in strength.
Forecast for EUR/USD and trader recommendations:
Sales of the pair are possible today upon consolidation below the ascending corridor on the hourly chart with a target at 1.0619. Purchases of the euro were possible upon closing (and upon rebound) above the level of 1.0696 on the hourly chart with a target of 1.0764. But bulls are currently quite weak, so the rise may end soon. Caution is advised with purchases.