The EUR/USD pair continued its upward movement on Tuesday and rebounded from the support zone of 1.0785–1.0797. Thus, the euro's rise may continue towards the next corrective level of 61.8%–1.0837. Holding above this level will increase the probability of further growth towards the next corrective level of 76.4%–1.0892. A rebound will lead to a reversal in favor of the US dollar and a decline toward the lower line of the ascending trend channel.
The wave situation remains unchanged. The last downward wave ended on May 1 and failed to approach the low of the previous wave, while the new upward wave has already surpassed the peak of the previous wave and continues to form. Thus, a "bullish" trend has formed, and bull traders attack almost daily. This trend is quite weak, and does not believe it will last long. However, the quotes have been rising for a month now, and bears cannot push the pair even to the lower line of the corridor. Therefore, there are no signs of the "bullish" trend ending.
The information background on Tuesday was weak, but in the evening, Jerome Powell explained to traders what the Fed expects soon and how it intends to act. The Fed chairman noted that he expects a slowdown in US inflation this year to last year's levels (approximately 3.0-3.1% y/y). He also mentioned that the regulator is considering something other than another tightening of monetary policy. He stated that the first three months of the year could have been better regarding inflation data, and confidence in achieving the 2% target has significantly decreased. The market did not react to these statements, but they indicated to traders that the hawkish FOMC policy may continue for a long time. This is positive news for the bears, but they are still too weak and lack initiative.
On the 4-hour chart, the pair has consolidated above the "wedge," which increases the probability of further growth towards the next Fibonacci level of 50.0%—1.0862. The recent segment of the euro's rise looks a bit ambiguous, so I'm not sure about the continuation of the uptrend. However, signals for expecting a decline are currently lacking. No imminent divergences were observed today, either.
Commitments of Traders (COT) report:
During the last reporting week, speculators opened 3409 long contracts and closed 7958 short contracts. The sentiment of the "Non-commercial" group turned "bearish" a couple of weeks ago, but now there is a balance between bulls and bears. The total number of long contracts held by speculators now stands at 170 thousand, while short contracts amount to 166 thousand. However, the situation will continue to change in favor of bears. The second column shows that the number of short positions has increased from 140 thousand to 166 thousand over the past three months. During the same period, the number of long positions has decreased from 202 thousand to 170 thousand. Bulls have dominated the market for too long, and now they need a strong background in information to restore the bullish trend. A series of poor reports from the US supported the euro, but more is needed in the long run.
News calendar for the US and the European Union:
European Union – GDP Volume Change in the First Quarter (06:00 UTC).
European Union – Industrial Production Volume Change (09:00 UTC).
US – Consumer Price Index (12:30 UTC).
US – Retail Sales Volume Change (12:30 UTC).
On May 15, the economic events calendar includes several entries, among which the US Consumer Price Index stands out. The impact of the information background on traders' sentiment for the remaining part of the day may be moderate.
EUR/USD forecast and trader advice:
Sales of the pair are possible on rebounds from the level of 1.0837 on the hourly chart, with targets at 1.0785 and the lower line of the ascending corridor. Buying the euro could be considered after the pair consolidates above the level of 1.0806 on the hourly chart with targets at 1.0837 and 1.0892.
