FX.co ★ EUR/USD. March 20. Crucial day for USD

On Tuesday, the euro/dollar pair continued its decline and secured a position below the 38.2% correction level – 1.0866. By the end of the day, the euro quotes returned to this level. Today, a rebound from the 1.0866 level will again work in favor of the US currency and the resumption of the decline toward the support zone of 1.0785 – 1.0801. Settling above the 1.0866 level will allow traders to anticipate a continuation of the growth towards the next correction level of 50.0% – 1.0918.

The situation with the waves remains quite clear. The last completed upward wave confidently broke through the peak of the previous wave from February 22, indicating a bullish trend with no signs of its end at the moment. Currently, a new downward wave is forming, but a break through the 1.0785 – 1.0801 area is needed to indicate a shift to bearish sentiment. On the other hand, a new upward wave should not surpass the peak from March 8. Until then, we observe only a corrective wave, which may resume after the bullish trend. The waves are currently quite large, but daily trader activity is low.

The news background on Tuesday was weak. Two economic sentiment indexes from the ZEW Institute were all that were noteworthy in the eurozone for the day. However, this evening the FOMC's decision on the rate, as well as new forecasts for economic growth, inflation, and interest rates will be announced. The FOMC meeting will conclude with a press conference by Jerome Powell. I expect the Fed's stance to remain unchanged, as the last inflation report showed no slowdown. It might even become more hawkish. For instance, Powell may indicate that the regulator needs to wait even longer before the first rate cut. This information could support the bears.

On the 4-hour chart, the pair has fallen to the lower line of the ascending trend corridor and secured a position below it. Thus, the decline in quotes may continue towards the Fibo level of 38.2% – 1.0765, if a close below the 50.0% correction level – 1.0862 is achieved. The traders' sentiment after exiting the corridor has shifted to bearish. No emerging divergences are observed in any of the indicators today.

COT report:

In the last reporting week, traders closed 3,027 long contracts and 14,123 short contracts. The Non-commercial group's sentiment remains bullish but continues to weaken. The total number of long contracts held by speculators now stands at 194,000, and short contracts at 119,000. The situation will continue to shift in favor of bears. Meanwhile, we see that the number of short positions increased to 119,000 from 83,000 over the last 2.5 months. During the same period, the number of long positions decreased to 194,000 from 235,000. Bulls have dominated the market for too long, and now they need a strong news background to maintain the bullish trend. I do not see this happening shortly.

News Calendar for the US and eurozone:

Eurozone – Speech by ECB President Christine Lagarde (08-45 UTC).

USA – Fed interest rate decision (18-00 UTC).

USA – Fed economic forecasts (18-00 UTC).

USA – Fed rate forecasts (18-00 UTC).

USA – Jerome Powell speaks at a press conference (18-30 UTC).

On March 20, the economic calendar includes several critical events in the US and eurozone. The influence of the news background on traders' sentiment today could be very strong.

EUR/USD forecast and tips for traders:

Selling the pair was possible with a rebound from the 1.0959 level on the 4-hour chart with targets at 1.0918 and 1.0866. Both targets were hit. New sales can be opened upon closing below the 1.0866 level on the hourly chart with a target at 1.0801. Long positions on the pair are possible upon securing above the 1.0866 level on the hourly chart with targets at 1.0918 and 1.0959. However, I believe that the pair is likely to decline today.