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On Tuesday, the EUR/USD pair managed to consolidate above the resistance zone of 1.1260–1.1282, which had previously triggered three pullbacks. As a result, the euro's upward movement continued, and on its way up, bulls secured a close above the 50.0% Fibonacci level at 1.1320. This consolidation allows for expectations of further growth toward the next resistance zone at 1.1374–1.1380.
The wave structure on the hourly chart is starting to evolve. The latest upward wave broke the previous wave's high, while the most recent downward wave failed to break the previous low. Thus, the trend has shifted to "bullish." News of a successful round of negotiations between the U.S. and China, along with the Fed's "hawkish" stance, briefly supported the bears—but only for a very short time. Donald Trump's trade policy is once again placing strong pressure on the U.S. dollar.
There was no significant news on Tuesday, and none is expected on Wednesday either. Therefore, the bulls' renewed offensive may seem surprising—but it also shows that they are ready to initiate a new trend, even without fresh negative news from America. Bears had an entire month to show their intentions but only managed to demonstrate slight interest in selling. Bulls are tired of sitting idle and waiting. While global trade tensions have eased, the trade war is far from over, and there are no guarantees we won't see further escalations. Tariffs on imports remain in effect, and for the U.S. economy, any tariffs now are a negative factor. If this negative impact is compounded by traders' concerns about the U.S. economic outlook, the bulls may continue their offensive for a long time. Economic reports still have minimal influence on trader sentiment.
On the 4-hour chart, the pair reversed in favor of the euro and consolidated above the 100.0% Fibonacci level at 1.1213, which signals a potential resumption of the bullish trend—something also indicated by the wave structure. The upward movement could continue toward the 127.2% corrective level at 1.1495. No emerging divergences are observed today on any indicators.
Commitments of Traders (COT) Report:
During the last reporting week, professional traders opened 15,357 long positions and 6,302 short positions. The sentiment of the "Non-commercial" group has been solidly bullish for a while now—thanks to Donald Trump. The total number of long positions held by speculators is now 209,000, while short positions amount to 124,000, with the gap continuing to widen. This means the euro remains in demand, while the dollar does not. The situation remains unchanged.
For fifteen consecutive weeks, large market players have been reducing their short positions and increasing longs. The divergence in monetary policy approaches between the ECB and the Fed still favors the U.S. dollar through the widening interest rate differential. However, Donald Trump's policies are an even more important factor for traders, as they pose a threat of a U.S. economic recession. As a result, dollar bulls cannot—and do not want to—capitalize on Fed policy.
News Calendar for the U.S. and Eurozone:
On May 21, the economic calendar contains no notable entries. The influence of the news background on market sentiment on Wednesday will once again be absent.
EUR/USD Forecast and Trading Advice:
Selling the pair is possible today on a bounce from the 1.1374–1.1380 zone on the hourly chart, with targets at 1.1320 and 1.1260–1.1282. I recommended considering long positions upon a close above the 1.1265–1.1282 zone on the hourly chart, with targets at 1.1338 and 1.1374. The first target has already been reached, and there is no reason to close long positions yet.
Fibonacci grids are drawn from 1.1574–1.1066 on the hourly chart and from 1.1214–1.0179 on the 4-hour chart.
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