On Friday, the EUR/USD pair reversed in favor of the U.S. dollar and returned to the support zone of 1.1070–1.1081. A rebound from this zone could lead to a reversal in favor of the euro and a resumption of growth towards the 200.0% retracement level at 1.1165. Consolidating below this zone would increase the likelihood of a further decline towards the next Fibonacci level of 127.2% at 1.0984.
The wave situation has become slightly more complex but remains generally clear. The last completed upward wave surpassed the peak of the previous wave, while the last completed downward wave hasn't approached the previous low from August 15. Thus, the bullish trend remains intact. For the bullish trend to be invalidated, the bears need to break the low of the last downward wave, which is near the 1.1026 level. Alternatively, the current upward wave should not surpass the peak from August 26.
The news background on Friday was strong but once again failed to bring positive news for the U.S. dollar. Specifically, the unemployment rate fell to 4.2%, which is undoubtedly positive as it eases some tension regarding the Fed's monetary policy. However, the number of new jobs in the Nonfarm Payrolls report fell short of traders' expectations for both August and July. Thus, bulls had more reasons to act aggressively than bears. The slight rise in the U.S. dollar by the end of the day should not be misleading. For the bearish movement to continue, the pair must consolidate below the 1.1070–1.1081 zone. Only then can we expect a drop to 1.0984. Ahead of the Fed meeting, a rise in the dollar is possible, but I don't foresee a strong trend for now. The ECB meeting this week may result in a second rate cut, which could slightly support the bears, but we should also keep an eye on the U.S. inflation report.
On the 4-hour chart, the pair reversed from the 100.0% retracement level at 1.1139 in favor of the U.S. dollar and began to decline towards the 76.4% retracement level at 1.1013. Some signs of a new bearish trend are emerging on the 4-hour chart, but without strong news support from the U.S., it will be difficult for the dollar to continue growing for an extended period. No emerging divergences are currently observed on any indicator.
Commitments of Traders (COT) Report:
In the latest reporting week, speculators closed 2,412 long positions and 9,592 short positions. The sentiment of the "Non-commercial" group turned bearish a few months ago, but bulls currently dominate. The total number of long positions held by speculators now stands at 215,000, while short positions amount to only 115,000.
I still believe that the situation will continue to shift in favor of the bears. I see no long-term reasons to buy the euro. I also want to note that the FOMC rate cut in September has already been priced in by the market with a 100% probability. The potential for the euro to decline is significant. However, we must not forget about chart analysis, which currently doesn't indicate a strong decline in the euro, as well as the news background.
News Calendar for the US and Eurozone:
On September 9, the economic events calendar contains no significant entries. The impact of the news background on traders' sentiment will be absent today.
Forecast for EUR/USD and Trading Advice:
Selling the pair was possible after a rebound from the 1.1139 level on the 4-hour chart, targeting 1.1070–1.1081, which has already been reached. New sales can be considered after a close below the 1.1070–1.1081 zone, targeting 1.0984. I wouldn't consider buying at the start of the new week.
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.
