On Thursday, the EUR/USD pair completed a new consolidation below the 1.0750 level. On Friday, it bounced off of this level and turned in the US dollar's favor. As a result, a new phase of falling toward the corrective level of 161.8% (1.0614) has started and could continue next week.
This week, there was a serious lack of background information. Except for Jerome Powell's speech on Tuesday at the Economic Club in Washington, I basically can't recall any significant happenings. Even though this event wasn't supposed to alter traders' emotions, they were pleased about it because the calendar was empty. Except for a few days of adjustment, the European currency has mostly kept falling this week. I conclude that the recent developments, including the good US statistics and the "hawkish" Fed and ECB decisions, are still in play. By the way, traders continue to pay close attention to central bank interest rates. Unfortunately, there is nothing new to offer on this subject because the members of the FOMC or ECB committee continue to argue that rates must rise because inflation is still unacceptably high. In my opinion, traders have factored into current prices the European regulator's decision to tighten the PEPP by an additional 0.75% at the following two meetings, which prevents the euro currency from resuming its growth process.
Since changes to monetary policies are not anticipated very soon, economic figures are currently becoming more prominent. Strong statistics are present in the US, particularly when it comes to the labor market, unemployment, and GDP. The unemployment rate in the European Union has not been good for a very long time, and the GDP is on the verge of falling below zero. There is no reason for the dollar to rise much in the upcoming weeks, even if it does not decline much either.
The pair is still declining on the 4-hour chart and has managed to stay under the upward channel. Since the pair left the channel, where they had been since October, I believe this moment to be of utmost importance. The current "bearish" trading sentiment offers the US dollar good growth chances with targets of 1.0610 and 1.0201. Emerging divergences are currently undetectable in any indication.
Report on Commitments of Traders (COT):
Speculators opened 9,464 long contracts and 2,099 short contracts during the most recent reporting week. Major traders' attitude is still "bullish" and has somewhat improved. Currently, 238 thousand long futures and 103 thousand short contracts are all concentrated in the hands of traders. The COT figures show that the European currency is now growing, but I also see that the number of long positions is over 2.5 times greater than the number of short positions. The likelihood of the euro currency's expansion has been steadily increasing over the past few months, much like the euro itself, but the information background hasn't always backed it up. After a prolonged "black period," the situation is still favorable for the euro, therefore its prospects are still good. Until the ECB gradually raises the interest rate by increments of 0.50%, at least.
News calendar for the USA and the European Union:
US – consumer sentiment index from the University of Michigan (15:00 UTC).
The United States and the European Union each have one entry for February 10 in their respective economic event calendars. The information background will have minimal to no impact on the traders' attitudes today.
Forecast for EUR/USD and trading advice:
On a 4-hour chart, I suggested selling the pair when it closed below the threshold. The targets are 1.0614 and 1.0750. Two more sell signals have emerged from the 1.0750 level, allowing for the continuation of sell transactions. On the 4-hour chart, purchases of the euro currency are possible when it recovers from the level of 1.0610 with a target of 1.0750.
