After stabilizing above the corrective level of 127.2% (1.0705) in the direction of the Fibo level of 100.0% (1.0808) on Wednesday, the EUR/USD pair resumed a very sluggish growth process. As prices rise from this level, some will fall in the direction of 1.0705, helping the US dollar. The likelihood of the euro continuing to rise in the direction of the next corrective level of 76.4% (1.0896) will be higher if closing quotes are above 1.0808.
Yesterday was a dull and uneventful day. There is constant news on the foreign currency market that can be discussed, but I attempt to focus readers' attention only on the most significant stories and happenings that have the potential to influence traders' attitudes. In the first three days of the week, there weren't many of them. I can only pick out Jerome Powell's Tuesday address, which had absolutely nothing to do with monetary policy matters. This indicates that it had little value to traders. Only today will traders receive the first significant report: data on US inflation in December.
Let me remind you that despite a sizable decline in the indicator over the previous six months, the problem of lowering inflation in America is still a pressing one. The Fed is prepared to hike interest rates further if necessary since they still do not have confidence that the return to 2% will occur without a hitch. This week, several FOMC members simultaneously announced it. The Fed rate may rise more strongly and for a longer period than traders anticipate if the rate of reduction in the consumer price index slows. Such news would be favorable for the US dollar, but given that energy costs have dropped significantly over the past month, global inflation may be already dropping. Let me remind you that many analysts have linked the recent surge in gas and oil prices to the recent sharp increase in inflation. According to the projection, which states that US inflation will be 6.5% y/y today, I anticipate a reduction in inflation.
The pair reversed in favor of the euro on the 4-hour chart and anchored above the corrective level of 100.0% (1.0638). Fixing this level on its own has little meaning given that there have been others during the preceding month. As a result, I suggest that you focus more on the hourly chart's graphical analysis.
Report on Commitments of Traders (COT):
Speculators closed 29,344 long contracts and 13,097 short contracts during the previous reporting week. Major traders' optimism is still positive, but it has waned over the past two weeks. Currently, 222 thousand of long futures and 92 thousand of short contracts are all concentrated in the hands of traders. According to COT statistics, the value of the euro is now increasing, but I'm also conscious of the fact that there are 2.5 times more long positions than short positions. The likelihood of the euro currency's expansion has been increasing over the past few weeks, much like the euro itself, but the information background does not always support it. After a protracted "dark time," the situation is now improving for the euro, so its prospects are still good. Going beyond the ascending corridor on the 4-hour chart, however, would signal a strengthening of "bearish" positions soon.
The United States and the European Union's news calendar:
US - consumer price index (CPI)
US - number of initial jobless benefit applications
The calendars of economic events for the European Union and the United States both include a significant entry for January 12th. The information background may have a weak to moderate impact on traders' attitudes today.
Forecast for EUR/USD and trading advice:
When the pair closes on the hourly chart below the level of 1.0705, sales of the pair are probable with a target price of 1.0574. Alternatively, if the price moves up from the level of 1.0808 with a goal of 1.0705. With a goal price of 1.0808 and a recovery from the level of 1.0705, purchases of the euro currency are possible. Alternatively, with a goal of 1.0896 and a closing above 1.0808.
