On Tuesday, the EUR/USD pair continued its decline towards the 127.2% corrective level at 1.0984. A rebound from this level could signal a reversal in favor of the euro. This could lead to a potential rise toward the resistance zone at 1.1070–1.1081. A rebound from this resistance zone could lead to a decline to the 1.0984 level. The new bearish trend remains intact.
The wave structure has become somewhat more complex, though it still raises no major concerns. The last completed downward wave did not break the low of the previous wave, and the last completed upward wave did not break the peak of the previous wave from August 26. Therefore, the bullish trend is currently canceled. If the current downward wave breaks the low from September 3 more decisively, it will further confirm the formation of a bearish trend.
The news background on Tuesday was very weak, but today and tomorrow, traders will not be able to complain about a lack of important data. Today, the U.S. Consumer Price Index for August will be released. While this is unlikely to affect the decision the FOMC will make next week, a more rapid decline in inflation is detrimental to the dollar. Tomorrow, the ECB meeting is expected, where a decision to cut the interest rate by another 0.25% is likely. Traders are already prepared for this decision, so it shouldn't come as a surprise. However, the speech by Christine Lagarde could adjust traders' expectations regarding further monetary policy easing. The more dovish her comments are, the higher the likelihood of a euro decline. But it's important to remember that next week is the Federal Reserve meeting.
On the 4-hour chart, the pair dropped to the 76.4% Fibonacci retracement level at 1.1013. There are some early signs of a new bearish trend on the 4-hour chart, but without strong news from the U.S., the dollar may struggle to continue its growth for an extended period. No emerging divergences are observed on any indicators today. A rebound from the 1.1013 level will favor the euro and lead to some growth towards the 1.1139 level.
Commitments of Traders (COT) Report:
In the latest reporting week, speculators closed 2,412 long positions and 9,592 short positions. According to the Commitments of Traders (COT) Report, the sentiment among the "Non-commercial" group turned bearish several months ago, but bulls still actively dominate. The total number of long positions held by speculators now stands at 215,000, while short positions total only 115,000.
I still believe that the situation will continue to favor the bears. I see no long-term reasons to buy the euro. It's also worth noting that the market has fully priced in a Fed rate cut in September. The potential for a substantial decline in the euro remains high. However, we shouldn't forget about technical analysis, which currently doesn't suggest a strong euro decline with certainty.
News calendar for the U.S. and the Eurozone:
- U.S. – Consumer Price Index (12:30 UTC).
On September 11, the economic calendar includes only one, but very important, event. The impact of the news background on trader sentiment will be strong, but mainly in the second half of the day.
Forecast for EUR/USD and trader recommendations:
Selling the pair was possible after a rebound from the 1.1139 level on the 4-hour chart, with a target of 1.1070–1.1081. It was also possible to sell the euro after a close below the 1.1070–1.1081 zone, targeting 1.0984. These trades remain valid and can be held. I wouldn't consider buying this week, but the U.S. inflation report could trigger bullish activity.
Fibonacci levels are drawn from 1.0917 to 1.0668 on the hourly chart and from 1.1139 to 1.0603 on the 4-hour chart.
