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The EUR/USD pair executed a new reversal in favor of the European currency on Thursday and began a new upward process towards the 76.4% Fibonacci retracement level at 1.0764. Already at current levels, the pair may execute a new reversal in favor of the American dollar and initiate a new decline towards the 127.2% Fibonacci level at 1.0619, as it has already reversed five times around the 1.0740 level. The bears have twice breached the lower line of the ascending trend channel but did not receive the expected support from the Fed and now fear weak US labor market statistics.
The wave situation remains unchanged. The last completed downward wave broke the low of the previous wave (from April 2), while the last upward wave failed to surpass the last peak from April 9. Thus, we are dealing with a "bearish" trend, and at the moment, there is no sign of its completion. For such a sign to appear, the new downward wave (which may have started forming on April 26) must fail to break the last low from April 16. Until then, bears will maintain their advantage despite the apparent advantage of bulls in recent weeks.
The information background on Thursday was weak, but overall, this week, traders have already received enough information to draw certain conclusions. Undoubtedly, the key event was the Fed meeting, and the fact that bears failed to advance suggests that they were expecting a more "hawkish" rhetoric from Jerome Powell. Perhaps they were even expecting words about a new tightening of monetary policy, given that inflation in the US is moving in the opposite direction to the target level. However, in my opinion, it was too naive to expect words about tightening when the FOMC is still preparing for easing. Either way, bears will now await support from today's US statistics.
On the 4-hour chart, the pair executed a reversal in favor of the US dollar around the corrective level of 38.2%-1.0765 after the formation of a "bearish" divergence on the CCI indicator. Thus, the decline has begun and continues towards the 23.6% Fibonacci level at 1.0644. A bounce of quotes from this level will allow traders to count on some growth in the euro, while consolidation below it will indicate further decline towards the next correction level of 0.0% at 1.0450. No impending divergences were observed today.
Commitments of Traders (COT) report:
During the last reporting week, speculators closed 11616 long contracts and opened 10597 short contracts. The sentiment of the "non-commercial" group has become "bearish" and is rapidly strengthening. The total number of long contracts held by speculators now stands at 167 thousand, while short contracts amount to 177 thousand. I still believe that the situation will continue to change in favor of bears. In the second column, we see that the number of short positions has increased from 92 thousand to 177 thousand over the past 3 months. During the same period, the number of long positions decreased from 211 thousand to 167 thousand. Bulls have dominated the market for too long, and now they need strong informational support to resume the "bullish" trend. However, the information background has increasingly supported bears lately.
News Calendar for the US and the Eurozone:
Eurozone – Unemployment Rate (09:00 UTC).
US – Nonfarm Payrolls Change (12:30 UTC).
US – Unemployment Rate (12:30 UTC).
US – Average Hourly Earnings Change (12:30 UTC).
US – ISM Services Purchasing Managers' Index (12:30 UTC).
On May 3, the economic events calendar contains four entries, each of which is very important. The impact of the news background on trader sentiment today can be strong, but predominantly in the second half of the day.
Forecast for EUR/USD and Trader Advice:
Selling the pair is possible today if it consolidates below the level of 1.0696 on the hourly chart, with a target at 1.0619, but trader sentiment will largely depend on US reports. Buying the euro could have been considered after closing above the level of 1.0696 on the hourly chart, with a target at 1.0764, but today, I find it difficult to expect continued growth. Most likely, it will end around the 1.0740 level.
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