The EUR/USD pair made an upward movement to the corrective level of 61.8% (1.0883) on Wednesday, bounced off it, and turned in favor of the US currency, dropping below the Fibonacci level of 76.4% (1.0823). The consolidation of quotes below this level allows expecting a continuation of the decline toward the next corrective level of 100.0% (1.0725). Closing the pair's rate today above 1.0823 will favor the EU currency and some growth towards 1.0883.
The wave situation remains ambiguous. The last downward wave broke the low of the previous wave by only a few points. Yesterday's upward wave did not reach the peak of the previous wave. Everything indicates that the "bearish" trend persists, but the waves are approximately the same size. We do not see clearly defined impulsive and corrective waves, but the "bearish" sentiment persists, and a further decline in the European currency can be expected.
The information background on Wednesday was very strong. During the initial part of the day, significant reports were released in Germany. Following lunch, the ADP report in the US, and later in the evening, the outcomes of the Federal Reserve meeting, along with a press conference featuring Jerome Powell, were revealed. German reports on unemployment, inflation, and retail trade practically did not impact traders' sentiment. However, the ADP report on the number of new jobs turned out to be 40,000, weaker than traders' expectations, leading to bullish activation. The FRS meeting and Powell's speech helped the bears as the Federal Reserve President clarified that the probability of a rate cut in March is minimal.
Today, there is an important report on inflation in the European Union, which may further strengthen the bearish positions in the market. The consumer price index in January will likely decrease, so we expect a new decline in the euro.
On the 4-hour chart, the pair reversed in favor of the US dollar and continued downward toward the corrective level of 38.2% (1.0765). A new descending trend corridor has formed, characterizing traders' sentiment as "bearish." No imminent divergences are observed with any indicator today. A bounce of the pair's rate from the level of 1.0765 will allow expecting a slight rise towards the Fibonacci level of 50.0% (1.0862).
Commitments of Traders (COT) report:
On the last reporting week, speculators closed 9104 long contracts and opened 6664 short contracts. The sentiment of major traders remains "bullish" but continues to weaken. The total number of long contracts concentrated in the hands of speculators now amounts to 195 thousand, and short contracts - 107 thousand. Despite a fairly large gap, the situation will shift toward the bears. Bulls dominated the market for too long, and now they need a strong information background to maintain the "bullish" trend. I don't see such a background now. Professional traders may continue to close long positions soon. The current figures allow for a continuation of the decline in the euro in the coming months.
News calendar for the US and the European Union:
European Union - Germany Manufacturing Purchasing Managers' Index (08:55 UTC).
European Union - Manufacturing Purchasing Managers' Index (09:00 UTC).
European Union - Consumer Price Index (10:00 UTC).
US - Initial Jobless Claims (13:30 UTC).
European Union - ECB President Christine Lagarde's speech (13:45 UTC).
US - Manufacturing Purchasing Managers' Index (14:45 UTC).
US - ISM Manufacturing Purchasing Managers' Index (15:00 UTC).
On February 1, the economic events calendar includes many important entries, with ECB President Christine Lagarde's speech and inflation in the European Union standing out. The impact of the information background on traders' sentiment today can be strong.
Forecast for EUR/USD and trader recommendations:
Selling the pair was possible on the rebound from the level of 1.0883 on the hourly chart with a target of 1.0823. Open short positions can currently be held with a target of 1.0725 until closing above 1.0823. I will consider buying the pair today on rebounds from the levels of 1.0765 and 1.0725.
