On Tuesday, the EUR/USD pair traded sideways. The peak of the last upward wave wasn't broken, so there remains a chance of a reversal in favor of the U.S. dollar, a return to the support zone at 1.1070–1.1081, and consolidation below it, maintaining the "bearish" trend. However, traders understand that today everything will depend on the Fed's decisions. The dollar may continue to decline, and the "bearish" trend could end in that case.
The wave situation has become a bit more complex but still doesn't raise major questions. The last completed downward wave broke the low of the previous wave, while the last completed upward wave didn't break the peak from August 26. Thus, the "bearish" trend continues to form for now. It may be short-lived, but for it to be canceled, the pair needs to close above the last peak from September 6 at 1.1152. Until then, the focus remains on selling the pair.
The informational background on Tuesday was weak, as clearly shown in the charts. Trader activity was practically zero yesterday. In the Eurozone, I can only highlight the ZEW institute indices, while in the U.S., reports on retail sales and industrial production were released. Both U.S. reports exceeded traders' expectations, so, yesterday, the bears had a chance to push the pair lower. However, nothing came of it, as today, the bears may retreat once again. There's been much speculation about what decision traders have factored into the market in recent days and weeks, but if the interest rate is cut by 0.50%, the U.S. dollar could come under strong pressure. Therefore, traders are hesitant to open positions until the FOMC decision is known. Tonight, we can expect increased volatility. It will be very difficult to respond promptly to the Fed's decisions.
On the 4-hour chart, the pair rebounded from the 76.4% corrective level at 1.1013 and rose to the 100.0% Fibonacci level at 1.1139. A rebound has occurred from this level as well. The CCI indicator has formed two "bearish" divergences, significantly increasing the likelihood of a reversal in favor of the U.S. dollar. A decline toward the 1.1013 level may begin. Consolidating above the 1.1139 level would suggest continued growth toward the next corrective level of 127.2% at 1.1286.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 23,148 long positions and 4,563 short positions. The sentiment in the "Non-commercial" group turned "bearish" a few months ago, but bulls are actively dominating once again. The total number of long positions held by speculators now stands at 193,000, while short contracts total only 111,000.
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. I would also note that a Fed rate cut in September is already priced into the market with a very high probability. The potential for the euro to decline is substantial. However, we must not forget about the graphical analysis, which doesn't currently signal a strong euro decline, and the informational background, which continues to obstruct the dollar's progress.
News calendar for the U.S. and Eurozone:
- Eurozone – Consumer Price Index (09:00 UTC).
- U.S. – Change in Building Permits (12:30 UTC).
- U.S. – Change in Housing Starts (12:30 UTC).
- U.S. – FOMC Interest Rate Decision (18:00 UTC).
- U.S. – Rate Projections for the Next Three Years (18:00 UTC).
- U.S. – FOMC Press Conference (18:30 UTC).
On September 18, the economic calendar contains at least three noteworthy entries. The informational background's influence on trader sentiment today could be quite strong, especially in the evening.
Forecast for EUR/USD and trading advice:
New sales of the pair are possible on a rebound from the 1.1139 level on the 4-hour chart, with a target of 1.0984. Buying opportunities can be considered upon closing above 1.1139 on the 4-hour chart, with targets of 1.1165 and 1.1286. However, today everything will depend on the decisions of the U.S. central bank.
Fibonacci grids are drawn from 1.0917 to 1.0668 on the hourly chart and from 1.1139 to 1.0603 on the 4-hour chart.
