The EUR/USD pair reversed in favor of the European currency on Thursday and resumed its growth, ending the day in the resistance zone of 1.0764–1.0806 and near the resistance zone of 1.0785–1.0797. A rebound of quotes from either the first or the second zone will favor the US currency and lead to a new decline towards the lower line of the ascending trend corridor. Only consolidation above the level of 1.0806 will allow traders to count on further growth of the euro.
The wave situation remains unchanged. The last downward wave failed to approach the low of the previous wave, while the new upward wave has already surpassed the peak of the previous wave. Thus, a "bullish" trend has formed, but its prospects raise doubts for me. The news background has supported bullish traders over the past 2-3 weeks. However, will it continue to support them further? This is a big question, as the European Union's economy is experiencing difficult times, and the ECB is ready to start easing monetary policy earlier than the Fed, which already has a much lower interest rate at the moment.
There was no significant news in the EU and the US on Thursday, but it was present in the UK. The meeting of the Bank of England triggered bullish activity in the second half of the day. In my opinion, this is a very strange reaction of the bulls, as the outcome of the Bank of England meeting can hardly be called "hawkish." The rate decision vote ended with a count of 7-2, not 8-1 as predicted, and Andrew Bailey did not rule out a rate cut as early as June. By all parameters, the pound should have fallen yesterday, and along with it, the euro. But everything turned out exactly the opposite. Such moments are not uncommon in the market. Some characterize them as "buy on rumors, sell on facts." However, if traders were selling the pound on rumors, they should have also been selling on facts.
On the 4-hour chart, the pair returned to the upper line of the "wedge." A new rebound from this line will again favor the US dollar and lead to a downward movement toward the corrective level of 23.6% (1.0644). Consolidation of quotes above the "wedge" will increase the probability of further growth towards the next Fibonacci level of 50.0% at 1.0862 and change the "bearish" trend to "bullish." There are no imminent divergences observed 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 turned "bearish" and is rapidly strengthening. The total number of Long contracts held by speculators now stands at 167 thousand, while Short contracts amount to 173 thousand. The situation will continue to change in favor of the bears. The second column shows that the number of Short positions has increased from 92 thousand to 173 thousand over the past three months. During the same period, Long positions decreased from 211 thousand to 167 thousand. Bulls have dominated the market for too long, and now they need a strong news background to resume the "bullish" trend. Several poor reports from the US supported the euro, but in the long run, more is needed.
News Calendar for the US and EU:
US - University of Michigan Consumer Sentiment Index (14:00 UTC).
On May 10, the economic events calendar contains one entry. The impact of the news background on traders' sentiment for the remaining part of the day will be weak.
EUR/USD Forecast and Trader Advice:
New sales of the pair are possible upon a rebound of quotes from the zone of 1.0785–1.0797 on the hourly chart, with the target being the lower line of the ascending corridor. I would not consider buying the euro until the pair consolidates above the level of 1.0806 on the hourly chart with targets of 1.0840 and 1.0874. It is also possible to buy in case of a rebound of quotes from the lower line of the ascending corridor.