FX.co ★ EUR/USD: technical analysis on March 4. Bears cannot rule market, bulls taking pause

Hi, dear traders! On Friday, the EUR/USD pair made another rebound from the support zone of 1.0785–1.0794 and consolidated above 1.0823, the Fibonacci level of 76.4%. Thus, the instrument may extend its growth for some time in the direction of 1.0883, the Fibonacci level of 61.8%. However, EUR/USD has been locked in a sideways channel in recent weeks. Therefore, I do not expect a strong rally in the euro, especially on Monday, when there the information background is futile. If EUR/USD settles below the zone of 1.0785–1.0794, this will work in favor of the American currency. So, we could expect a stronger fall of the euro towards 1.0725, the Fibonacci level of 100.0%.

The situation with the waves remains quite clear. The last completed upward wave confidently broke through the peak of the previous wave (from February 12), but at the moment I consider it completed. Thus, EUR/USD has been following a bullish trend and there is not a single sign of its completion. However, the consolidation below the corridor can be considered the first sign of a retreat by the bulls. Oddly, the bears are in no hurry to take advantage of. In the near future, I expect the continuation of a downward corrective wave, which will not disrupt the bullish trend. But if the next ascending wave fails to break through the peak of February 22, we will get the first wave sign of a change in trend to bearish.

The information background on Friday was quite abundant and interesting. The consumer price index in the EU fell only to 2.6% y/y, and the core index - to 3.1%. Traders expected a stronger slowdown in February. The unemployment rate inched down from 6.5% to 6.4%. However, these three reports had virtually no impact on trading sentiment. In the afternoon, US data was downbeat, which supported the bulls. However, the trading range can very quickly return the price back to the support zone of 1.0785 – 1.0797.

On the 4-hour chart, the instrument made two drops from 1.0862, the correction level of 50.0%. Thus, a reversal was made in favor of the American currency and a very weak fall began in the direction of 1.0765, the correction level of 38.2%. If EUR/USD settles above 1.0862, this will work in favor of the euro. Hence, the instrument will resume its growth in the direction of 1.0959, a correction level of 61.8%. No new emerging divergences are observed today in any indicator.

Commitments of Traders (COT):

In the last reporting week, speculators closed 7,960 long contracts and 2,798 short contracts. The non-commercial group's sentiment remains bullish, but continues to weaken. The total number of long contracts is now 205K, and short contracts – 142K. I still believe that the situation will continue to change in favor of the bears. The bulls have dominated the market for too long and now they need a strong information background to maintain the bullish trend. At the same time, the total number of open long positions is less than the number of short positions (635K versus 662K). But this balance of trading forces has been already observed for some time.

Economic calendar for US and EU

On Monday, the economic calendar does not contain any noteworthy reports. Therefore, the information will make no impact on market sentiment today.

Outlook and trading tips for EUR/USD

Sell positions of EUR/USD were possible on the back of a rebound from 1.0862 on the 4-hour chart with targets at 1.0823 and 1.0785. The first target was hit, but the price narrowly missed the second target. Traders can open new sell positions when the price rebounds from 1.0862 or 1.0883 with targets at 1.0823 and 1.0797. Buying the pair is possible during dips from the support zone of 1.0785 – 1.0797 on the 1-hour chart with the target of 1.0862.