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On Friday, the EUR/USD pair reversed in favor of the euro and began a new rise towards the corrective level of 76.4% (1.0892). Given the pair's movement over the last 6-8 days, I think a reversal in favor of the US dollar and a new decline towards the support zone of 1.0785–1.0797 is likely today. I do not expect a significant drop in the euro until the quotes consolidate below the ascending corridor and the important support zone of 1.0785–1.0797. Until then, the bulls maintain their leadership in the market.
The wave situation remains clear. The last downward wave ended on May 1 and failed to approach the low of the previous wave, while the last upward wave broke the peak of the previous wave. Thus, the bullish trend remains. I consider this trend quite unstable and believe it will only last for a while. However, the growth in quotes has been ongoing for more than a month, and the bears have yet to push the pair even to the lower line of the channel. There are no signs of the bullish trend ending at this time. A sign will appear if a new downward wave breaks the low from May 1.
The informational background on Friday allowed the bears to continue pressing the dominant bulls. The University of Michigan consumer sentiment index in the US was 69.1 in May, against expectations of 67.5, and durable goods orders increased by 0.7% against expectations of -0.8%. Thus, the US dollar could have continued to grow, but the bulls again did not allow the bears to achieve anything. The informational background cannot counteract the strength of the bulls at this time. The fact that the pair has been unable to continue growing for a week and a half means nothing. Bulls also need temporary pauses to gather new strength and gain additional confidence in their actions. At the moment, the likelihood of further euro growth is at least 80%, given the current distribution of forces in the market.
On the 4-hour chart, the pair consolidated above the "wedge" and grew to the 50.0% Fibonacci level at 1.0862. The recent segment of euro growth seems ambiguous, so I am not sure it will continue. No impending divergences are observed today. If there is a close above 1.0862, the growth process may continue towards the next corrective level of 61.8% at 1.0959. The pair's decline is better tracked on the hourly chart.
Commitments of Traders (COT) Report:
During the last reporting week, speculators opened 4,176 long contracts and closed 20,144 short contracts. The sentiment of the "Non-commercial" group turned bearish a few weeks ago, but now the bulls hold the advantage again. The total number of Long contracts held by speculators now stands at 182,000, while Short contracts are at 141,000. The gap is increasing again in favor of the bulls.
However, the situation will continue to shift in favor of the bears. I do not see long-term reasons to buy the euro, as the ECB is already prepared to begin easing monetary policy. This will reduce the yield on bank deposits and government bonds, which will remain at high levels in America, making the dollar more attractive to investors. However, it is necessary to react to the data from graphical analysis and COT reports, which indicate a persistent bullish sentiment.
News Calendar for the US and the Eurozone:
The economic event calendar contains no interesting entries on May 27. The informational background's influence on trader sentiment will be absent today.
Forecast for EUR/USD and Trading Tips:
Selling the pair was possible upon closing below the 1.0837 level with a target of 1.0785. This target still needs to be achieved. New pair sales are only possible with a new close below 1.0837, targeting 1.0797. Buying the euro can be done upon a rebound from the 1.0785–1.0797 zone on the hourly chart with targets of 1.0837 and 1.0892.
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