On Monday, the EUR/USD pair reversed in favor of the European currency and resumed its rise toward 1.1000. The fact that bull traders gave up the initiative by releasing a pair from an upward area does not perplex them. Such closure is seen as a significant sign for bears. However, they merely slept through the moment. Yet, the bulls' positions have weakened during the past few days. The growth of the euro currency is weakening. I anticipate that a decline to the 1.0750 level will begin in the near future.
Monday's informational context could have been more consistent. In March, the business activity index in the European Union's manufacturing sector was 47.3, as reported in the morning. Traders anticipated values to be slightly lower - 47.1. In the United States, the ISM business activity index for the manufacturing sector fell to 46.3, whereas market participants had anticipated 49.0. The ISM index was disappointing. By then, the dollar had already dropped 100 points against the euro. Although the morning index in the European Union stayed below the 50.0 level, it is unlikely that it contributed to the 100-point increase in the euro. Recall that all values below 50 are considered negative. As can be seen, the background information did not affect Monday's pair movement.
Also, it should be noted that Mondays are rarely busy days (unless there is a strong informational background). Typically, the market rises on the first trading day of the week. And the daily rise of 100 points might result from either significant news or a strong "bullish" sentiment among traders. The consequences of the second hypothesis have been observed. Given the sentiment of market participants, the European currency may continue to rise on Tuesday.
In the 4-hour chart, the pair has maintained itself above the side corridor, allowing us to anticipate further growth. But it was not possible to consolidate above the corrective level of 50% (1.0941), and two "bearish" divergences have already developed, with a third "brewing." Hence, the pair's drop persists on both charts. Closing quotes above 1.0941 will allow traders to anticipate additional growth toward the corrective level of 61.8% (1.1273).
Report on Commitments of Traders (COT):
Speculators opened 6,920 short contracts and 709 long contracts during the previous reporting week. Overall, the sentiment of large traders remains "bullish" and continues to improve. The overall number of long contracts held by speculators is now 223 thousand, and the number of short contracts is 78 thousand. The European currency has been rising for almost six months, but the number of long contracts among professional traders has stayed the same during the past few weeks. After a lengthy "dark period," the euro's status remains favorable. Thus, its prospects remain positive. At least until the ECB gradually increases the interest rate by 0.50%. I want to note, however, that in the near future, the market sentiment may become "bearish" since the ECB will no longer be able to raise rates by a half percentage point on an ongoing basis. There are sell indicators on both charts.
News calendar for the United States and Europe:
US – number of open vacancies in the JOLTS labor market (14:00 UTC)
On April 4, there is only one interesting economic event on the calendars of the European Union and the United States. Today, the impact of the information context on the sentiment of traders may be minimal.
EUR/USD forecast and trading suggestions:
On a 4-hour chart, sales of the pair might be opened on a rebound from 1.0941 with targets at 1.0861 and 1.0750. In a 4-hour chart, purchases are possible when the price closes over 1.0941 with targets at 1.0000 and 1.1100.
