FX.co ★ Analysis of EUR/USD on June 7. Bears likely to regain control

Hi everyone! Yesterday, the EUR/USD pair retreated from 1.0726, the Fibonacci correction level of 38.2%. It fell to 1.0652, the Fibonacci correction level of 23.6%. If the pair rebounds from this level, it may rise to 1.0726. A drop below 1.0652 could trigger a decrease to 1.0609.

Yesterday, the economic calendar was empty. Bulls and bears had to tussle lacking any drivers that could stimulate a rise or fall in the pair. The EU only revealed retail sales data. The indicator turned out to be slightly worse than expected. The euro partially declined due to this data nit only partially. This report is of less significance to investors. Over the past year, oftentimes its figures have undershot estimates. Thus, the lack of growth hardly surprised anyone. In annual terms, retail sales decreased by 2.6%, which was even better than forecasts. Analysts predicted a fall of 3%. Based on these figures, the report can hardly be called too weak.

As bears are trying to take the upper hand, I believe that the market sentiment has not changed recently. The euro halted a drop for a month, then briefly closed over the descending channel, and moved to a correction. So, it is likely to resume a downward movement.

In my opinion, this scenario seems likely as Fed policymakers did not provide clear hints about the rate decision at the June meeting. Besides, they do not rule out new rate bikes. The ECB may raise its interest rate by 0.25%, but traders have already factored in such a likelihood ready for this for a long time. The European regulator has no reason to take a pause.

On the 4H chart, the pair advanced. However, its upward movement did not last long. It is likely to decline to 1.0610, the Fibonacci correction level of 38.2%. A rebound from this level could lead to a slight increase to 1.0941, the Fibo level of 50.0%. The consolidation below 1.0610 may trigger a fall to 1.0201, the Fibo level of 23.6%.

Commitments of Traders (COT):

In the last reporting week, speculators closed 8,253 long positions and 242 short ones. Bullish sentiment has been easing in recent weeks. The total number of long and short positions now held by speculators is 242,000 and 76,000 respectively. Although sentiment remains bullish, it may change soon. The euro has been bearish for two weeks now. There have been too many long positions opened, meaning buyers may start closing them soon or have already begun according to the two latest COT reports. The gap between long and short positions is too wide now, which allows us to assume there will be a bearish continuation in the near term.

Economic calendar for US and EU:

US– Trade balance (12:30 UTC).

On June 7, there is only one report from the United States. However, investors are likely to ignore it. The impact of fundamental background on the market sentiment may be weak today.

Outlook for EUR/USD:

We sell on a rebound from 1.0726 on the 1-hour chart, targeting 1.0652 and 1.0609. We also buy on a rebound from 1.0610 on the 4-hour chart with targets at 1.0726 and 1.0784.