The EUR/USD pair saw an increase above the corrective level of 23.6% (1.0644) on Tuesday, but it failed to rise significantly. In the second half of the day, there was a reversal in favor of the US currency, and the pair returned to the level of 1.0561. A bounce from this level allows us to anticipate a small rise in the euro, and a drop below it increases the likelihood of further decline towards the next level at 1.0497.
The wave situation has cleared up, then confused again and cleared up once more. Yesterday, an upward wave was completed, with its peak lower than the previous peak. Thus, we received the first sign of a trend change. A new downward wave has begun, and its task is to break through the low on October 26. In this case, the trend will change to "bearish." An upward retracement is possible today, but for now, I'm only looking downward.
The news background on Tuesday was quite interesting and important for the European currency. Traders couldn't make a definitive conclusion about the numbers they saw. Initially, they bought the euro, then panicked and sold it off. This was because the data could be interpreted from different angles. The GDP in the third quarter declined by 0.1%, though traders expected a higher figure. However, this is just the first estimate of the indicator, and there will be two more, which could turn out to be higher.
The Consumer Price Index dropped to 2.9%, which was better than expected. However, core inflation only dropped to 4.2%, which matched trader expectations. The fact that the euro was only falling after this data was released speaks volumes about how traders perceived the information negatively. I believe that only a complete failure of US reports on Wednesday, Thursday, and Friday can allow bullish traders to become active again.
On the 4-hour chart, the pair has settled below the corrective level of 100.0% (1.0639), which allows us to anticipate a decline towards the corrective level of 127.2% (1.0466). A sustained rate above 1.0639 will make us anticipate a resumption of growth towards the Fibonacci level of 76.4% (1.0790). No imminent divergences are observed in any of the indicators today.
Commitments of Traders (COT) report:
During the last reporting week, speculators opened 1,256 long contracts and closed 1,587 short contracts. The overall sentiment among large traders remains "bullish," but it has weakened significantly in recent weeks and months. The total number of long contracts held by speculators now stands at 215,000, while short contracts amount to 130,000. The difference is now less than double, whereas a few months ago, the gap was threefold. I believe the situation will continue to change in favor of bears. Bulls have dominated the market for too long, and they now need a strong news background to start a new "bullish" trend. Such a background is currently absent. Professional traders may continue to close their long positions in the near future. I believe that the current numbers allow for further euro depreciation in the coming months.
News Calendar for the USA and the European Union:
USA – Change in Non-farm Employment from ADP (12:15 UTC).
USA – Purchasing Managers' Index (PMI) in the Manufacturing Sector from ISM (14:00 UTC).
USA – Job Openings and Labor Turnover Survey (JOLTS) (14:00 UTC).
USA – Federal Reserve (FED) Interest Rate Decision (18:00 UTC).
USA – Fed's Federal Open Market Committee (FOMC) Statement (18:00 UTC).
USA – Fed's Federal Open Market Committee (FOMC) Press Conference (18:00 UTC).
On November 1, the economic events calendar features six entries, all in the USA. The impact of the news flow on traders' sentiment on Wednesday can be significant.
EUR/USD Forecast and Trader Recommendations:
Buying the pair is possible today upon a rebound on the hourly chart from the level of 1.0561, with targets at 1.0644 and 1.0714. I recommend selling today upon confirmation below the level of 1.0561 on the hourly chart, with targets at 1.0497 and 1.0449. However, please be cautious, as the news flow today could lead to rapid changes in the pair.
