The EUR/USD pair on Monday retraced to the resistance zone of 1.0785–1.0797, which is part of the larger resistance zone of 1.0764–1.0806. A bounce of quotes from this zone will favor the American currency and lead to a new decline towards the corrective level of 100.0% (1.0696). The ascending trend channel continues to characterize traders' sentiment as "bullish." The consolidation of the pair's rate above the level of 1.0806 will increase the likelihood of further growth towards the next Fibonacci level of 50.0%–1.0840.
The wave situation remains unchanged. The last downward wave failed to reach the low of the previous wave, while the new upward wave had already broken the peak of the previous wave. Thus, a "bullish" trend has formed, but its prospects personally raise doubts for me. Over the past 2-3 weeks, the information background has supported bull traders, but will it continue to do so? This is a big question, as the economy of the European Union is not in the best shape, and the ECB is ready to start easing monetary policy much earlier than the Fed, already having a much lower interest rate.
The information background on Monday was weak, and on Tuesday, it was even weaker. Neither yesterday nor today have we seen any attractive movements. Yesterday, it became known that the business activity index in the EU services sector was slightly above expectations – 53.3. Today, the retail trade report will be released. However, neither of these reports is paramount for traders, so it is quite difficult to expect further growth in the euro today. I believe that after the formation of another upward wave, a downward wave should begin, which allows for the current trend channel and the nature of movement. The bulls will find it difficult to break through the zone of 1.0764–1.0806 on the first attempt. I expect the euro to decline this week.
On the 4-hour chart, the pair has executed a reversal in favor of the European currency and continues the upward process towards the upper line of the "wedge." A bounce of quotes from this line will favour the US dollar and some decline towards the corrective level of 23.6%–1.0644. Consolidation of quotes above the "wedge" will increase the likelihood of further growth towards the next Fibonacci level of 50.0%–1.0862. There are no imminent divergences today.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 111 long contracts and 3323 short contracts. The sentiment of the "non-commercial" group has shifted to "bearish" and is overall rapidly strengthening. The total number of long contracts held by speculators now stands at 167,000, while short contracts amount to 173,000. The situation will continue to favor bears. In the second column, we see that the number of short positions has increased from 92,000 to 173,000 over the past three months. During the same period, the number of long positions decreased from 211,000 to 167,000. Bulls have dominated the market for too long, and now they need a strong information background to resume the "bullish" trend. Several poor reports from the US have supported the euro, but in the long run, more is needed.
News Calendar for the US and the European Union:
EU – Change in Retail Trade Volume (09:00 UTC).
On May 7th, the economic events calendar contains only one entry. The impact of the information background on traders' sentiment for the rest of the day will be very weak.
Forecast for EUR/USD and trader advice:
Sales of the pair are possible today upon consolidation below the level of 1.0764 on the hourly chart with a target of 1.0696. I would only consider buying the euro once the pair consolidates above the level of 1.0806 on the hourly chart, with targets at 1.0840 and 1.0874.