The EUR/USD pair reversed in favor of the euro on Monday and demonstrated modest growth throughout the day, approaching the 100.0% corrective level at 1.1003. Today, the growth may continue. A rebound from this Fibonacci level would enable a reversal in favor of the U.S. dollar and a resumption of the decline toward the 127.2% corrective level at 1.0946. A consolidation of the pair above 1.1003 would suggest further growth toward the next corrective level of 76.4% at 1.1053.
The wave situation has become more complex in recent weeks, but overall, there are no concerns. The last completed upward wave (September 25-30) did not break the previous wave's peak, while the new downward wave broke the lows of the previous three waves. Thus, the pair is currently forming a new "bearish" trend. We may see a corrective wave soon, but the bulls have already lost their momentum.
The information background on Monday was quite weak. In the Eurozone, the retail sales report was released, which, to put it mildly, was unimpressive. The European economy has long failed to please traders, and in recent months, the euro has risen mainly due to bullish sentiment, as many anticipated the FOMC would begin to ease monetary policy. However, counting on further euro growth is becoming increasingly difficult. The Federal Reserve has commenced easing its monetary policy, which has resulted in the euro losing a key support factor. Now that this factor is gone, traders are paying attention to the ECB's monetary policy. The European regulator may lower rates ahead of schedule in 2024, possibly reducing them in both October and December. The European economy is showing dismal results, and Christine Lagarde understands that something needs to be done. The only viable option is to continue easing. Inflation in the EU has fallen below the target level, so the central bank may speed up the normalization of its monetary policy.
On the 4-hour chart, the pair reversed in favor of the U.S. dollar after forming a series of "bearish" divergences on the RSI and CCI indicators. The RSI also entered the overbought zone a few weeks ago. A consolidation of quotes below 1.1013 suggests further declines toward the levels of 1.0935 and 1.0872. No emerging divergences are observed on any indicator today.
Commitments of Traders (COT) Report:
During the last reporting week, speculators closed 9,522 long positions and opened 6,849 short positions. The mood of the "Non-commercial" group turned "bearish" a few months ago, but the bulls are now dominant again. The total number of long positions held by speculators now stands at 178,000, while short positions total only 123,000.
However, for the fourth consecutive week, large players have been offloading the euro. In my view, this could signal the start of a new "bearish" trend or at least a correction. The key factor for the dollar's decline—the expectation of FOMC monetary easing—has played out, and the dollar no longer has reasons to fall. They may appear over time, but for now, a rise in the U.S. dollar seems more likely. The technical analysis also points to the start of a "bearish" trend. Therefore, I am preparing for a prolonged decline in the EUR/USD pair.
News calendar for the US and Eurozone:
On October 8, the economic event calendar contains no significant entries. Today, the information background will not impact traders' sentiment.
Forecast for EUR/USD and trading advice:
Sales of the pair were possible upon closing below the 1.1139 level on the 4-hour chart with targets of 1.1081, 1.1070, 1.1013, and 1.0984. All targets were reached. I wouldn't rush to initiate new sales. Pair purchases are possible today with a rebound on the hourly chart from the support zone of 1.0929–1.0946 with targets of 1.1003 and 1.1053. Or upon closing above 1.1003 with a target of 1.1053.
The Fibonacci levels are drawn from 1.1003 to 1.1214 on the hourly chart and from 1.1139 to 1.0603 on the 4-hour chart.
