The EUR/USD pair executed a reversal in favor of the European currency on Thursday, returning to the level of 1.0561. Today, on Friday, the pair completed a very weak close above this level, which allows traders to count on a small rise, but it is unlikely that we will see a strong strengthening of the euro today. However, during the American session, movements may be more active. The consolidation of quotes below the level of 1.0561 will again work in favor of the US dollar, as will the resumption of the decline towards the level of 1.0489.
The wave situation was clarified twice this week. If last week a "bullish" trend was forming, the last downward wave broke through the low of the penultimate wave. Thus, the first sign of a change in the trend to "bearish" was obtained. In conjunction with closing below the trend corridor, I would say that the pair has excellent chances for further decline. The first descending wave of the new trend turned out to be quite large, so today and on Monday, I expect the formation of an upward wave.
There was initially no intrigue associated with the ECB meeting. Interest rates remained unchanged (as traders expected), and Christine Lagarde promised to keep the rate within the restrictive zone for as long as necessary to sustain inflation at 2%. She also noted some upward risks for inflation related to the conflict in the Middle East but emphasized that additional tightening is not currently required. Thus, the meeting results turned out to be predictable and predictably failed to stir the market.
On the 4-hour chart, the pair has consolidated below the corrective level of 100.0% (1.0639), which allows us to count on a decline towards the corrective level of 127.2% (1.0466). A further consolidation below this level will further increase the chances of a continuation of the decline towards the next Fibo level of 161.8% (1.0245). The pair closed below the trend corridor, but it is practically the same as on the hourly chart. No impending divergences are observed in any of the indicators today.
Commitments of Traders (COT) Report:
During the last reporting week, speculators opened 6,791 long contracts and closed 87 short contracts. The sentiment of large traders remains "bullish" but has noticeably weakened in recent weeks and months. The total number of long contracts held by speculators is now 214,000, while short contracts amount to 132,000. The difference is now less than double, although a few months ago, the gap was triple. I believe the situation will continue to change in favor of the bears. Bulls have dominated the market for too long, and now they need a strong informational background to start a new "bullish" trend. Such a background is currently lacking. Professional traders may continue to close their long positions in the near future. I believe that the current figures allow for a further decline in the euro in the coming months.
News Calendar for the US and the European Union:
US - Core Personal Consumption Expenditures Price Index (12:30 UTC).
US - Personal Income and Outlays (12:30 UTC).
US - University of Michigan Consumer Sentiment Index (12:30 UTC).
On October 27, the economic calendar includes several entries, but none of them are particularly interesting. The impact of the information background on traders' sentiment on Friday may be weak.
Forecast for EUR/USD and trader recommendations:
Buy opportunities for the pair are possible today on an hourly chart rebound from the level of 1.0489 (1.0495) with a target of 1.0561. I recommended selling on an hourly chart closing below the corridor with a target of 1.0489 (1.0495). You can maintain these positions until a confident close above 1.0561.
