The EUR/USD pair reversed in favor of the US currency on Tuesday and began to fall towards the corrective level of 261.8% (1.0196). A rebound of the pair's exchange rate from this level will favor the EU currency and new growth toward the 1.0315 level. The consolidation of quotes under 1.0196 will likely mean a strong drop in the euro towards the level of 1.0080. The information background of yesterday and today is only disappointing so far. Yesterday, business activity indices in the US and EU manufacturing sectors turned out to be weaker than traders' expectations, and today there is no information background. It is all the more surprising to observe a rather strong drop in the European currency in the first half of the day. However, I have said more than once that bull traders are quite weak, as shown in the last few weeks. All this time, the euro tried to show growth, but it was very weak for such a long period.
The bulls seem to push the pair up with the last of their strength, but the bears will eventually win anyway. I want to remind you that the mood of traders now largely depends on the rates of the ECB and the Fed. And in this matter, the Fed holds an unambiguous leadership. Sometimes, sellers take a break for several weeks, during which the euro currency gets the opportunity to roll back up a little. But then the fall resumes anyway, which can be considered a reaction to the Fed's super-aggressive monetary policy. And I believe that this situation may continue until the end of this year. After all, the Federal Reserve System will continue to raise the interest rate at least to 3.5%. But the ambitions of the European Central Bank are somewhat more vague. The European regulator is trying to fight inflation but is afraid of a recession. In the European Union, unemployment is twice as high as in the United States, and business activity indices have already begun to cause concern. Thus, the ECB may raise rates much less frequently, and the dollar against this background may continue to grow in the year's second half.
On the 4-hour chart, the pair performed a new reversal in favor of the euro and anchored above the level of 127.2% (1.0173), not the first in a row. Thus, the growth process can be continued in the direction of the upper line of the descending trend corridor. The rebound of quotes from this line will work in favor of the US currency and the beginning of a new fall in the euro. Consolidation above the corridor will increase the probability of continued growth towards the next correction level of 100.0% (1.0638).
Commitments of Traders (COT) Report:
Last reporting week, speculators opened 2,166 long contracts and 1,005 short contracts. It means that the "bearish" mood of the major players has become a little weaker, but it has remained. The total number of long contracts concentrated in the hands of speculators is now 198 thousand, and short contracts – 240 thousand. The difference between these figures is still not too big, but it remains not in favor of the bulls. In the last few weeks, the chances of the euro currency's growth have been gradually increasing, but recent COT reports have shown no strong strengthening of the bulls' positions. Thus, it is still difficult to count on strong growth of the euro currency.
News calendar for the USA and the European Union:
On August 2, the calendars of economic events of the European Union and the United States do not contain a single interesting entry. Thus, the influence of the information background on the mood of traders today will be completely 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 1.0173. I recommended buying the euro currency when anchoring above the corridor on the hourly chart with a target of 1.0315. These trades can be kept open until closing at 1.0196.
