Good afternoon, dear traders! The EUR/USD pair consolidated near 1.0917, the Fibonacci correction level of 76.4% on Tuesday. It was moving in the upward price corridor. Thus, it could climb to 1.0966 as market sentiment remains bullish. If the pair breaks out of the price corridor, it may fall to 1.0843 and 1.0784. Trading volumes remain low due to the lack of economic reports.
Yesterday, traders analyzed building permits data, which slightly exceeded their expectations. The US dollar advanced following this report. However, at the end of the day, the pair practically did not change. Today, the main event will be Jerome Powell's speech before the Senate Banking Committee. Market sentiment on Wednesday will depend on his speech and Powell's answers to congressmen's questions. Since last week Powell made hawkish comments. The Fed has already risen the key rate to 5.25%. However, it is projected to hike the rate once or twice if inflation declines slowly.
However, the ECB may also raise the interest rate one or two more times. It means that the euro will also advance. I assume that now it is better to trade along the trend, which is seen on the 1H chart. A decrease below this level will trigger a downward movement regardless of fresh news or events. And vice versa.
On the 4H chart, the pair grew to 1.0941, the Fibo level of 50.0%. The bearish divergence of the CCI indicator, which was formed last week, vanished. No new divergences are seen in any indicator. A retreat from 1.0941 could lead to a fall to 1.0610. The consolidation above 1.0941 will increase the likelihood of a rise to 1.1273, the Fibonacci correction level of 61.8%.
Commitments of Traders (COT):
In the last reporting week, speculators closed 9,922 long positions and 3,323 short ones. The mood of large traders remains bullish but is slowly weakening. The total number of long positions now amounts to 2,260, and short contracts – only to 74,000. The bullish trend prevails. However, the situation may change in the near future. The euro has been declining a little more often for the last two months than it has been growing. The large volume of long open positions suggests that buyers may start closing them in the near future (or have already started as indicated by the latest COT reports). The bullish bias is too strong at the moment. I believe that the current figures signal a new fall in the euro in the near future.
Economic calendar for US and EU:
US – Jerome Powell's testimony (14:00 UTC).
On June 21, the economic calendar is almost empty, except for the speech of the Fed Chairman. The impact of the fundamental background on market sentiment might be moderate today.
Outlook for EUR/USD and trading recommendations:
I would advise you to go short if the pair retreats from 1.0966 on the hourly chart with targets at 1.0917 and 1.0843. The pair has already reached the first level. You could buy if the pair rebounds from 1.0917 or the lower border of the uptrend corridor with targets at 1.0966 and 1.1035.
