On Friday, the EUR/USD pair traded all day within the 1.0917 – 1.0929 range with minimal activity. On Monday, the traders' activity remains minimal, so I am not rushing to make conclusions or issue trading signals. Consolidation below the 1.0917 – 1.0929 zone could signal sell positions targeting the 38.2% corrective level at 1.0879, but the likelihood of strong movement today is extremely low.
The wave pattern has become slightly more complex, but overall it is not problematic. The last completed wave down did not break the low of the previous wave, and the last wave up broke the peak from July 16th. Therefore, the "bullish" trend is still intact. For this trend to be canceled, the bears now need to break the low of the last down wave, which is around the 1.0778 level. Ideally, they should secure a position below the important 1.0781 – 1.0799 zone, which serves as the strongest support.
The news on Friday did not generate any interest among traders. They learned that inflation in Germany rose to 2.3% in July, which is unlikely to influence future ECB decisions. The increase in consumer prices in the second month of summer was insignificant. European inflation also rose slightly in July, but this was already known last week. Thus, traders might have already factored in this information. This week, they will be paying attention to the U.S. inflation report, which is of much greater significance for the EUR/USD pair. Currently, the market expects monetary policy easing to begin in September. For confidence in this expectation to grow stronger, U.S. inflation needs to slow down in July. The forecast suggests a decrease to 2.9%, but I believe this is too little to expect the Fed to take active measures at the next meeting. However, if the actual inflation figure comes in lower than expected, the bulls on EUR/USD may gain new strength. The inflation report is due on Wednesday.
On the 4-hour chart, the pair rebounded from the 23.6% corrective level at 1.0977 and reversed in favor of the U.S. dollar. Therefore, the decline in quotes may continue towards the next Fibonacci level of 38.2% at 1.0876. Consolidation above the 1.0977 level would increase the likelihood of continued growth towards the next 0.0% corrective level at 1.1139. No significant divergences are observed in any indicator today.
Commitments of Traders (COT) Report:
During the last reporting week, speculators opened 2,793 long positions and closed 12,988 short positions. The market sentiment of the "Non-commercial" group turned "bearish" a few months ago, but currently, the bulls are once again dominating. The total number of long positions held by speculators now stands at 186,000, while short positions total 152,000.
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, as the ECB has begun easing monetary policy, which will lower the returns on bank deposits and government bonds. In the U.S., however, they will remain at a high level at least until September, making the dollar more attractive to investors. The potential for the euro to decline appears substantial. However, it is important to consider the technical analysis, which currently does not indicate a significant decline in the euro, as well as the information background.
News Calendar for the U.S. and the Eurozone:
The economic events calendar for August 12th contains no interesting entries. The impact of the information background on trader sentiment for the remainder of the day will be absent.
EUR/USD Forecast and Trading Tips:
A sell position may be considered with a target of 1.0879 on the hourly chart if consolidation occurs below the support zone at 1.0917 – 1.0929. Buying will be possible if the pair consolidates above the support zone at 1.0917 – 1.0929 on the hourly chart, with a target of 1.1008. In both cases, one should not expect a significant rise or fall today.
Fibonacci levels are drawn from 1.0668 – 1.1008 on the hourly chart, and from 1.0450 – 1.1139 on the 4-hour chart.
