On Wednesday, the EUR/USD pair continued its upward movement after breaking above the 127.2% corrective level at 1.0984. Today, this growth may continue towards the next Fibonacci level of 161.8% at 1.1070. The euro's rise over the past two days has been driven by the news. Today, the bulls will also need support from the news if they want to continue their success. A break below 1.0984 could suggest some decline towards the support zone of 1.0917–1.0929.
The wave structure has become somewhat more complex but remains clear overall. The last completed downward wave did not break the low of the previous wave, while the new upward wave broke the peak from August 5. Thus, the "bullish" trend is still intact. For the "bullish" trend to be canceled, the bears now need to break the low of the last downward wave, which is around the 1.0882 level.
The recent news dealt a significant blow to the dollar on Tuesday, and on Wednesday, it delivered a knockout. Now, the U.S. dollar is relying on today's news to improve compared to the past two days. While I can't definitively say that both inflation reports clearly signaled the need for the bears to retreat, the slowdown in the Consumer Price Index (CPI), Core CPI, and Producer Price Index (PPI) has significantly increased market confidence that the FOMC will finally cut interest rates in September—and not just a minor cut, but a full 0.50%. As a result, it's currently difficult for the dollar to expect a strong rally.
Additionally, yesterday's Eurozone GDP report for the second quarter only confirmed the first estimate: a growth of 0.3%. The industrial production report was worse than traders' expectations at -0.1%, but it was largely ignored. The market was too busy selling the dollar after the Producer Price Index report.
On the 4-hour chart, the pair reversed in favor of the euro near the 38.2% corrective level at 1.0876 and began a new upward move. Consolidation above the 23.6% Fibonacci level at 1.0977 suggests further growth towards the next corrective level of 0.0% at 1.1139. No emerging divergences are observed in any indicators. In my view, the current growth doesn't fully align with the news, but the chart clearly indicates a "bullish" trend with no signs of reversal.
Commitments of Traders (COT) Report:
I still believe that the situation will continue to shift in favor of the bears. I don't see long-term reasons to buy the euro, as the ECB has begun to ease monetary policy, which will lower the yields on bank deposits and government bonds. In the U.S., yields will remain high at least until September, making the dollar more attractive to investors. The potential for a decline in the euro seems significant. However, we shouldn't forget about the chart analysis, which currently doesn't provide a strong argument for a significant drop in the euro, as well as the news, which regularly throws a wrench in the dollar's path.
News Calendar for the U.S. and Eurozone:
- U.S. – Retail Sales Change (12:30 UTC).
- U.S. – Initial Jobless Claims Change (12:30 UTC).
- U.S. – Philadelphia Business Activity Index (12:30 UTC).
- U.S. – Industrial Production Change (12:30 UTC).
The economic events calendar for August 15 includes several important entries. The impact of the news on trader sentiment today could be moderate, particularly in the second half of the day.
EUR/USD Forecast and Trader Tips:
I wouldn't consider selling the pair today, as the bears are currently retreating from the market. Buying was possible on consolidation or a rebound from the support zone of 1.0917–1.0929 on the hourly chart with a target of 1.1008. This target has been achieved, and today's target is the 1.1070 level. The previous day's low at 1.1005 can be used as a stop for purchases.
The Fibonacci levels are drawn from 1.0917 to 1.0668 on the hourly chart and from 1.0450 to 1.1139 on the 4-hour chart.
