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The EUR/USD pair on Wednesday consolidated above the resistance zone of 1.0785–1.0801 and continues the upward trend towards the next corrective level of 38.2%–1.0866. A rebound of the pair from this level will work in favor of the US dollar and may lead to some retracement back to the zone of 1.0785–1.0801. Consolidation of quotes above the level of 1.0866 will favor further growth towards the next Fibonacci level of 50.0%–1.0918. The trend is still "bearish" for now.
The wave situation remains quite clear. The last completed downward wave broke the low of the previous wave (from March 19th), while the new upward wave has yet to approach the last peak (from March 21st). Thus, we are currently dealing with a "bearish" trend, and at the moment, there is no sign of its completion. For such a sign to appear, the new upward wave needs to break the current last peak (from March 21st). The bulls need to push the pair up by another 100 points for this to happen. Until then, I expect the decline in quotes to continue. If the new downward wave fails to break the low from April 2nd, this will also be a sign of the completion of the "bearish" trend.
The information background on Wednesday was very interesting. First, European inflation fell to 2.4% in March, which is very close to the ECB's target level. Second, the ISM Non-Manufacturing Purchasing Managers' Index in the US fell from 52.6 to 51.4, which the market did not expect. Traders ignored the inflation report as it implied a decline in the European currency. After it, the ECB will be even more convinced of the correctness of the step to cut interest rates in June. Thus, the European regulator may start easing monetary policy earlier than the Fed. And the ECB's rate will be even lower compared to the Fed's rate. However, the ISM index was pretty decent. It decreased in March but remained in the "green zone."
On the 4-hour chart, the pair made a reversal in favor of the European currency, consolidating above the Fibonacci level of 38.2%–1.0765 and continuing the upward trend towards the corrective level of 50.0%–1.0862. A rebound of the pair from this level may lead to a resumption of the decline towards 1.0765. The emerging "bearish" divergence on the CCI indicator increases the probability of a rebound from 1.0862. Consolidation above the level of 1.0862 increases the chances of further growth towards the next corrective level of 61.8%–1.0959.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 2189 long contracts and opened 14,959 short contracts. The sentiment of the "Non-commercial" group remains "bullish" but continues to weaken rapidly. The total number of long contracts held by speculators is now 180 thousand, while the number of short contracts is 149 thousand. The situation will continue to change in favor of the bears. In the second column, we see that the number of short positions has increased from 83 thousand to 149 thousand over the past 2.5 months. During the same period, the number of long positions decreased from 235 thousand to 180 thousand. Bulls have dominated the market for too long, and now they need a strong information background to resume the "bullish" trend. In the near future, I do not see such a background.
News Calendar for the US and EU:
EU – German Services Purchasing Managers' Index (07:55 UTC).
EU – Services Purchasing Managers' Index (08:00 UTC).
US – Initial Jobless Claims (12:30 UTC).
On April 4th, the economic events calendar contains three entries, none of which stand out – all of them have a low level of significance. The impact of the information background on traders' sentiment today will be weak.
Forecast for EUR/USD and Trader Recommendations:
Sales of the pair are possible today on a rebound from the level of 1.0862 on the 4-hour chart with a target of 1.0785–1.0801. Purchases of the pair were possible when consolidating above the zone of 1.0785–1.0801 on the hourly chart with a target of 1.0866 (1.0862). If these levels are surpassed today, one can stay in long positions with a target of 1.0918.
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