The EUR/USD pair rose to the corrective level of 38.2% (1.0810) on Monday but then reversed in favor of the American currency. Today, it has fallen by 70 points, and that's only when writing this article. The consolidation of quotes below the Fibonacci level of 23.6% (1.0744) allows us to anticipate further declines toward the next corrective level of 0.0% (1.0637). I currently do not see any potential buying signals.
Once again, the waves are speaking of a "bearish" trend. Yesterday, I doubted the decline in quotes would continue this week. However, the first level at 1.0810 on the bulls' path triggered new sales of the pair. Consequently, the last upward wave turned out weak, and a new downward wave has already broken its low. There are no signs of the "bearish" trend ending.
Yesterday was only interesting due to one event, which almost all news feeds have covered. However, this time, it was not about what Christine Lagarde said but rather about what she didn't say. When asked by a reporter about a rate hike at the September meeting, the ECB President preferred not to answer. This morning, Lagarde spoke again, with the same outcome. If the market may have yet to understand how to react to Lagarde's modesty yesterday, it has decided to get rid of the euro in anticipation of a pause in the ECB's tightening policy. I have previously mentioned that the likelihood of the ECB keeping rates unchanged in September is quite high, and some members of the MPC started talking about a pause a couple of months ago. Therefore, the ECB President indeed caused the decline in the European currency. Without her influence, we may be witnessing a rise at the moment.
On the 4-hour chart, the pair has consolidated above the descending trend corridor and resumed its decline. This is a rather strange moment, but overcoming two levels on the way down and breaking the last low speaks unequivocally of a "bearish" trend. Thus, the decline in quotes may continue toward the next corrective level of 100.0% (1.0639). Nevertheless, let's remember that the pair has closed above the corridor.
Commitments of Traders (COT) Report:
During the last reporting week, speculators closed 8,849 long contracts and opened 3,232 short contracts. The sentiment among large traders remains "bullish" and generally is not weakening too quickly. The total number of long contracts concentrated in the hands of speculators now stands at 230,000, while short contracts amount to 83,000. The situation will eventually change in the opposite direction, but bearish traders are not attacking the bulls too aggressively now. The high value of open long contracts suggests that professional traders may close them soon—there is currently too strong a bias towards the bulls. The current figures allow for continuing the euro's decline in the coming weeks. The ECB is increasingly signaling the end of the tightening of monetary policy.
News Calendar for the US and the Eurozone:
Eurozone - ECB President Lagarde will deliver a speech (07:00 UTC).
Eurozone - Services Business Activity Index (08:00 UTC).
Eurozone - ECB representative Schnabel will speak (12:00 UTC).
On September 5th, the economic events calendar included three important events that have already occurred. The impact of the information background on traders' sentiment for the remaining part of the day will be absent.
Forecast for EUR/USD and trader recommendations:
Sales could have been initiated with a close below 1.0864 on the hourly chart, targeting 1.0810 and 1.0744. The bounce from the 1.0810 level allowed these positions to remain open. Both targets have been met, but you can still hold sales with a target of 1.0637. I do not see any potential buying opportunities for today.
