On Wednesday, the EUR/USD pair reversed near the 23.6% Fibonacci retracement level at 1.1395 in favor of the euro and began a fairly expected advance toward the upper boundary of the sideways trading range at the 50.0% Fibonacci level of 1.1472. As a result, the upward move may continue today. A rebound from 1.1472 would favor the US dollar and signal a resumption of the decline toward 1.1395.
The wave structure on the hourly chart remains bearish despite the bulls' prolonged, albeit weak, attempt to regain control. The most recent completed upward wave exceeded the previous high by only a few points, while the latest downward wave failed to break below the previous low. Meanwhile, the geopolitical backdrop has deteriorated again as Iran and the United States have resumed military operations and disruptions to shipping through the Strait of Hormuz. A break above 1.1473 would be needed to confirm that the bearish trend has ended. However, over the past three weeks, bulls have shown little conviction.
Wednesday's news flow once again failed to generate any meaningful market reaction, as no major economic releases were published during the day. The euro spent another quiet session with limited price fluctuations.
Today, the European Central Bank will announce its monetary policy decision, and traders will be looking for guidance on the regulator's future policy plans. Since the ECB is not expected to tighten monetary policy in July, the key question is whether policymakers anticipate inflation to accelerate again as a result of the renewed conflict in the Middle East and the latest rise in oil prices. If so, further policy tightening later this year cannot be ruled out, which could theoretically provide some support for euro bulls today.
However, the pair remains confined to the 1.1395-1.1472 trading range. A breakout from this range will depend primarily on traders' willingness to establish new positions rather than on the policy stance of either the ECB or the Federal Reserve.
On the 4-hour chart, the pair continues to trade sideways. A close above 1.1411 supports the case for a modest recovery, although price direction has changed too frequently in recent sessions, reflecting subdued market participation. No developing divergences are currently visible on any technical indicators. The downward trend channel remains intact.
Commitments of Traders (COT) Report
During the latest reporting week, institutional traders opened 6,877 long positions and 3,255 short positions. The overwhelming bullish advantage that existed during February and March disappeared over seven weeks amid the conflict involving Iran. Over the past sixteen weeks, positioning has become more balanced against the backdrop of the temporary ceasefire and hopes for an end to the conflict. Speculative traders currently hold approximately 230,000 long positions compared with 245,000 short positions.
Overall, large institutional investors continue to maintain a constructive long-term view on the euro. Naturally, the steady flow of global geopolitical events continues to influence investor sentiment. In particular, markets remain focused on developments in the Middle East, where the conflict has repeatedly escalated and de-escalated. The market initially ignored the announcement of a ceasefire and later paid little attention to the renewed fighting. As a result, geopolitics is no longer the sole factor determining the US dollar's direction.
Economic Calendar
Eurozone
- ECB Interest Rate Decision (12:15 UTC)
- ECB Press Conference (12:45 UTC)
United States
- Initial Jobless Claims (12:30 UTC)
The economic calendar for July 23 includes two key ECB events. While they could influence market sentiment on Thursday, any resulting volatility is likely to remain limited.
EUR/USD Forecast and Trading Tips
Long positions were justified after a rebound from 1.1395 on the hourly chart, with targets at 1.1438 and 1.1472. The first target has already been reached, and existing long positions may remain open. New short positions may be considered if the pair closes below 1.1395 on the hourly chart, targeting 1.1325. Alternatively, short positions may be opened after a rejection from 1.1472, with 1.1395 as the downward target. Overall, market activity remains exceptionally subdued.
The Fibonacci retracement levels are plotted from 1.1620 to 1.1325 on the hourly chart and from 1.1411 to 1.1850 on the 4-hour chart.
