On Thursday, EUR/USD reversed in favor of the US dollar and consolidated below the 100.0% retracement level at 1.1620. This is already the fifth or sixth close below or above this level that has not led to any follow-through. Traders should keep this in mind. The bears launched an attack yesterday, although logically, the bulls should have been the ones to attack. However, the bulls remained passive, while the bears did not move far.
The wave structure on the hourly chart remains "bullish" despite the two-week decline. The latest completed upward wave broke the previous peak, while the latest downward wave did not break the previous low. Geopolitical conditions remain consistently negative: negotiations between Iran and the United States are not taking place, and the blockade of the Strait of Hormuz remains in place. The FOMC's stance is currently more important for the dollar, but it remains contradictory.
The news background on Thursday provided traders with an opportunity to trade for the first time this week rather than sit on the sidelines. However, the movements we ultimately saw were only very weakly correlated with the nature of the news background. If we set aside all secondary events, only the ECB meeting remains, at which the regulator decided to raise the deposit rate to 2.50%. As a reminder, the deposit rate is considered the main policy rate in the European Union. However, the refinancing rate and the marginal lending rate were also raised by 0.25%. Thus, for the second time in three months, the ECB tightened monetary policy because of accelerating inflation in the euro area. In addition, the ECB's accompanying statement said that inflation would remain above the target level for at least another three years, while the average inflation rate for 2026 is projected at 3%. In 2027 and 2028, inflation is expected to slow to 2.1%. However, it probably makes little sense to pay attention to forecasts two or three years ahead at this point. Geopolitical developments could significantly worsen the position of central banks in controlling consumer prices, or they could resolve the problem without further tightening.
On the 4-hour chart, the pair rose to the 61.8% retracement level at 1.1649 and rebounded from it. Thus, a reversal in favor of the US dollar took place, and the decline toward 1.1588 and 1.1526 began. Consolidation above 1.1649 would allow for a continuation of the upward move toward the next Fibonacci level, 76.4% at 1.1726. No emerging divergences are currently observed in any of the indicators.
Commitments of Traders (COT) Report:
During the latest reporting week, professional traders opened 4,558 Long positions and closed 6,869 Short positions. Over the seven weeks in February and March, the bulls' overwhelming advantage evaporated because of the war in Iran, while over the past twenty-three weeks, the situation has become more balanced amid the purported ceasefire and market hopes for an end to the war. The total number of Long positions held by speculators currently stands at 203,000, while the number of Short positions stands at 228,000. The bears remain in the lead, but their advantage is rapidly narrowing.
Overall, over the long term, large market participants continue to view the euro with considerable interest. Of course, events of various kinds around the world, which have been abundant in recent years, affect investor sentiment. In particular, the market is currently keeping a close eye on the situation in the Middle East, where the war alternately appears to end and then starts again. However, geopolitics no longer determines the dollar's fate single-handedly.
News calendar for the United States and the European Union:
- United States – Consumer Price Index (12:30 UTC).
- United States – University of Michigan Consumer Sentiment Index (14:00 UTC).
On September 11, the economic calendar contains two entries, one of which is the US inflation report, which cannot be overlooked. The economic background may influence market sentiment in the second half of Friday's trading session.
EUR/USD forecast and trading advice:
Buying the pair is possible if it closes above 1.1620 on the hourly chart, with a target of 1.1700. Selling the pair is possible if it consolidates below 1.1620 on the hourly chart, with a target of 1.1551. Trader activity and market movements remain relatively weak.
The Fibonacci grids are drawn from 1.1620 to 1.1325 on the hourly chart and from 1.1849 to 1.1325 on the 4-hour chart.
