On Wednesday, the EUR/USD pair rebounded from the corrective level of 76.4% (1.0823), reversing in favor of the European currency and rising towards the Fibonacci level of 50.0% (1.0932). However, a rebound from this level also occurred, which favored the US currency, leading to a drop towards the corrective level of 61.8% (1.0883). If the pair's exchange rate stays below 1.0883, we can anticipate a decline towards 1.0823. Closing above 1.0883 would support an upward move toward the Fibonacci level of 50.0%.
The wave situation has changed slightly over the past day. The latest downward wave confidently broke the lows of the previous wave, but the last upward wave surpassed the peak of the previous one. Thus, we have the first sign of the end of the bearish trend. A new bullish trend will form if the lows from January 22nd are not breached in the coming days. The breakout of yesterday's peak will also indicate traders transitioning to the active buying phase. However, I would refrain from drawing long-term conclusions before the ECB meeting and Christine Lagarde's speech.
The background information on Wednesday was quite interesting.
Business activity indices in Germany and the European Union were both positive and negative simultaneously. While the manufacturing sector grew in January, the service sector declined further in both cases. All business activity indices are still below the key level of 50.0.
These reports cannot be considered strong, but bulls found positive aspects, causing the European currency to rise during the day. Today, we have the ECB meeting and President Lagarde's speech. These events could support both bears and bulls regarding the European currency. It's unlikely that anyone knows what Lagarde will talk about, what forecasts she will provide, and how she views changes in ECB monetary policy in 2024.
On the 4-hour chart, the pair reversed in favor of the euro currency after forming a bullish divergence on the RSI indicator. The pair's growth may already be complete. The consolidation of quotes below the ascending trend channel signifies a shift to a bearish trend, and we should now expect a more significant decline in the euro currency. Today, the consolidation below the Fibonacci level of 50.0% (1.0862) will support expectations for a resumption of the pair's decline toward the corrective level of 38.2% (1.0765).
Commitments of Traders (COT) Report:
In the last reporting week, speculators closed 4,179 long contracts and opened 10,606 short contracts. The sentiment among large traders remains bullish but continues to weaken. The total number of long contracts held by speculators now stands at 204,000, while short contracts amount to 100,000. Despite the significant difference, the situation will shift toward the bears. Bulls have dominated the market for too long, and now they need a strong background of information to maintain the bullish trend. I do not see such a background currently. Professional traders may continue to close their long positions soon. The current figures allow for a resumption of the euro currency's decline in the coming months.
Economic Calendar for the US and the European Union:
European Union - IFO Business Climate Index for Germany (09:00 UTC).
European Union - ECB Interest Rate Decision (13:15 UTC).
US - Durable Goods Orders (13:30 UTC).
US - GDP Change in the Fourth Quarter (13:30 UTC).
US - Initial Jobless Claims (13:30 UTC).
European Union - ECB Press Conference (13:45 UTC).
European Union - Speech by ECB President Christine Lagarde (15:15 UTC).
On January 25th, the economic events calendar is filled with various events and reports. The impact of the background information on trader sentiment today could be significant.
Forecast for EUR/USD and Trader Recommendations:
Selling the pair was possible yesterday on the bounce from the level of 1.0932 on the hourly chart. The first target at the level of 1.0883 has been reached, and the decline may continue towards the level of 1.0823. Buying opportunities could be considered on a rebound from the level of 1.0823 on the hourly chart, with targets at 1.0883 and 1.0932. Both targets have been achieved. New buying opportunities may arise on a bounce from the level of 1.0823.
