On Thursday, the EUR/USD pair rebounded from the corrective level of 76.4% (1.0892) and turned in favor of the US dollar. Thus, the process of falling toward the Fibonacci level of 61.8% (1.0837) began, which is currently too weak to be considered a wave. A rebound from the 1.0837 level will favor the euro and a return to the 1.0892 level. Consolidation below 1.0837 will allow traders to expect a continuation of the fall toward the support zone of 1.0785–1.0797.
The wave situation remains unchanged. The last downward wave ended on May 1st and failed to approach the low of the previous wave, while the new upward wave has already broken the previous wave's peak and has been forming for 12 days. Thus, a bullish trend has formed, with bulls attacking almost daily. I consider this trend rather weak and do not believe it will continue for long. However, the upward movement continued for a month, and the bears could not push the pair even to the lower line of the channel. Therefore, there are no signs of the bullish trend ending now.
The information background on Thursday once again let down the US dollar, although the market needed to see fit to react to all the information received. However, yesterday should be forgotten. Today, the final inflation report for April will be released in the Eurozone. The consumer price index is expected to slow to 2.4% year-on-year. Core inflation may slow to 2.7%, enough for the ECB to consider lowering rates next month. After a significant rise in the euro and a prolonged period of bull dominance, I naturally expect a decline. However, it is only about a corrective wave that will not break the bullish trend. The fact that the ECB is ready to start easing monetary policy should support the bears.
On the 4-hour chart, the pair consolidated above the "wedge" and rose to the 50.0% Fibonacci level at 1.0862. The last segment of the euro's growth looks ambiguous, so I am unsure about continuing the upward movement. However, sell signals are needed to expect a decline, which is currently absent. No emerging divergences were observed today, either. The growth process may continue towards the next corrective level of 61.8% (1.0959). Sell signals are better tracked on the hourly chart.
Commitments of Traders (COT) Report:
During the last reporting week, speculators opened 3,409 long contracts and closed 7,958 short contracts. The sentiment of the "non-commercial" group turned bearish a couple of weeks ago, but now there is equilibrium between the bulls and bears. The total number of long contracts held by speculators now stands at 170 thousand, while the number of short contracts is 166 thousand. However, the situation will continue to shift in favor of the bears. In the second column, the number of short positions has increased from 140 thousand to 166 thousand over the last three months. Long positions decreased from 202 thousand to 170 thousand during the same period. The bulls have dominated the market for too long, and now they need a strong background in information to resume the bullish trend. A series of poor reports from the US supported the euro, but more is needed for the long term.
News calendar for the US and the Eurozone:
Eurozone – Consumer Price Index (09:00 UTC).
The economic event calendar contains only one entry on May 17th. The information background's impact on trader sentiment today will be weak.
Forecast for EUR/USD and trading tips:
Selling the pair was possible on a rebound from the 1.0892 level on the hourly chart, with targets at 1.0837 and the lower line of the ascending corridor. These trades can now remain open. Buying the euro can be considered a rebound from the 1.0837 level or from the 1.0785–1.0797 zone on the hourly chart with a target of 1.0892.
