FX.co ★ Forecast for EUR/USD on October 21. The ECB is still losing to the Fed and will lose the battle

The EUR/USD pair on Thursday consolidated below the level of 0.9782, which increases the chances of continuing to fall in the direction of the next corrective level of 423.6% (0.9585). Over the past two weeks, the euro currency has been "going through torments," trying to grow up a little. However, bull traders have not increased in the market, and there are real chances of a fall resumption.

In my opinion, this week, those traders who at least allowed the further growth of the euro currency abandoned this worldview. This is because the information has been steadily received about the inability and unwillingness of European regulators to raise the rate until inflation begins to slow down. In other words, the ECB rate is 1.25%, and inflation is rising. No one doubts that the ECB will raise the rate one, two, or three more times, but what if these measures do not lead to a significant drop in the CPI? Will the regulator be ready to continue raising the rate for the fourth, fifth, or sixth time?

If the rate changes, it affects not only inflation but also the cost of borrowing, deposit rates, loans, and investment flows into and out of the country. The higher the interest rate, the more investors tend to accumulate and save rather than invest. Consequently, the economy is slowing down. And the ECB cannot afford to ignore this fact. It's one thing when it comes to a slight slowdown, but to return inflation to 2%, you need to raise the rate to 4%-5%. And with this value, the economic slowdown will not be small. Also, do not forget that the European Union is full of problematic countries that barely survived the pandemic and have huge public debts. Their debts will also go up if the rate goes up too much. Based on these arguments, traders do not believe that the ECB can overcome inflation, but the Fed can.

On the 4-hour chart, the pair continues the growth process in the direction of the upper line of the descending trend corridor. However, the mood of traders on this chart remains "bearish" without any questions. Only consolidation above the descending corridor will allow us to count on a tangible growth of the euro currency in the direction of the corrective level of 127.2% (1.0173). Rebound from the upper line of the corridor will work in favor of resuming the fall in the direction of the Fibo level of 161.8% (0.9581). The "bullish" divergence of the CCI indicator has already been canceled.

Commitments of Traders (COT) Report:

Last reporting week, speculators closed 3,255 long contracts and opened 2,928 short contracts. This means that the mood of large traders has become a little less "bullish" than before. The total number of long contracts concentrated in the hands of speculators is now 196 thousand, and the total number of short contracts – 158 thousand. However, the euro is still experiencing serious problems with growth. In the last few weeks, the chances of the euro's growth have been increasing, but traders are more actively buying up the dollar than the euro. Therefore, I would now bet on an important descending corridor on the 4-hour chart, over which the euro failed to close. I also recommend carefully monitoring the news of geopolitics, as it greatly affects the mood of traders. As we can see, even the "bullish" mood of the major players does not yet allow the euro to show growth.

News calendar for the USA and the European Union:

On October 21, the calendars of economic events of the European Union and the United States do not contain important entries. The influence of the information background on the mood today will be absent.

EUR/USD forecast and recommendations to traders:

I recommend new sales of the pair when rebounding from the upper line of the corridor on the 4-hour chart with a target of 0.9581. I recommend buying the euro currency when fixing quotes above the upper line of the corridor on a 4-hour chart with a target of 1.0638.