On Wednesday, the EUR/USD pair executed a reversal in favor of the European currency, rising above the 1.0917 level. However, by the end of the day, it had also returned to the area below this level, and currently, the pair is attempting to secure a new position above the corrective level. If this occurs, the growth process may continue toward the next Fibonacci level of 76.4% (1.0984). But I do not expect any significant growth of the European currency at this time, at most – around 60 points.
The waves continue to tell us only one thing: the bearish trend persists. Last week, there were many questions about the current trend as the movement was horizontal, and the waves often broke through the previous highs and lows. However, now we can say with more confidence that the trend is bearish, as the last downward wave covered all the previous waves over the last 2.5 weeks. The last upward wave did not break the previous peak, meaning that bears still maintain the advantage.
Yesterday, the European currency could have shown stronger growth if a fairly strong report on changes in US retail sales volumes hadn't been released in the second half of the day. It became known that volumes increased by 0.7%, while traders expected an increase of 0.4%. Thus, the dollar grew slightly, which kept the pair from further strengthening. Today, the report on EU GDP for the second quarter will be released. The expected value is +0.3% q/q, and the actual value is unlikely to differ. I don't expect a strong reaction from traders or significant growth of the euro currency today.
On the 4-hour chart, the pair executed a consolidation below the ascending trend line and two rebounds from the Fibonacci level of 38.2% (1.1032). Thus, I expected the European currency to fall to the corrective level of 61.8% (1.0882), and it happened. The rebound in quotes from this level worked in favor of the euro currency and started to rise toward the level of 1.0957. A "bullish" divergence also formed on the CCI indicator. A rebound of the pair from the level of 1.0957 will bring the pair back to falling towards 1.0882 and 1.0790.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 12,026 long contracts and opened 10,225 short contracts. The sentiment of large traders remains "bullish," but has significantly weakened over the past week. The total number of long contracts held by speculators now stands at 228 thousand, and short contracts – 78 thousand. The bullish sentiment continues, but I believe that the situation will continue to shift in the opposite direction shortly. The high value of open long contracts suggests that buyers may continue to close them soon – too strong a bias towards bulls at this time. I believe that the current figures allow for the continuation of the euro currency's decline in the coming weeks. The ECB is increasingly signaling the imminent completion of the QE tightening procedure.
News calendar for the US and EU:
European Union - GDP for the second quarter (09:00 UTC).
European Union - Industrial production volume (09:00 UTC).
USA - Number of building permits issued (12:30 UTC).
USA - Industrial production volume (12:30 UTC).
USA - Publication of FOMC minutes (18:00 UTC).
On August 16th, the economic events calendar includes several interesting entries, each of which may be of interest to traders. The influence of the information background on the sentiment of traders throughout the day will be moderate in strength.
Forecast for EUR/USD and advice for traders:
I previously advised selling at a rebound from the 1.1035 level on the hourly chart with targets of 1.0984 and 1.0917. Both targets were reached, and new sales are advised at a rebound from the levels of 1.0957 or 1.0984. Purchases are possible upon closing above 1.0917, but I still find it hard to expect strong growth of the euro.
