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On Thursday, the EUR/USD pair rebounded once again from the 1.1802 level and declined almost to the 127.2% Fibonacci retracement level at 1.1712. As of Friday morning, the pair is in the process of returning to the 1.1802 level. Another rebound from this level may signal a reversal in favor of the U.S. dollar and a potential decline toward 1.1712. A consolidation above 1.1802 would increase the likelihood of further growth toward the next Fibonacci retracement level at 1.1888.
On the hourly chart, the wave structure remains simple and clear. The most recent completed downward wave broke the low of the previous wave, while the last upward wave surpassed the previous high. Thus, the trend currently remains bullish. The lack of real progress in U.S. trade negotiations and the low likelihood of trade deals being reached with most countries continue to discourage bearish sentiment.
Thursday's news background was strong and, importantly, favorable for bears—something rare in recent months. However, all three key U.S. economic reports turned out stronger than traders had expected. I won't even consider the PMI indices for the Eurozone and Germany, as they had no impact on market sentiment. Let's return to the U.S. statistics. Traders had expected the unemployment rate to rise to 4.3%, but it actually declined to 4.1%. The number of new nonfarm jobs in June totaled 147,000, exceeding the forecast of 100,000–110,000, while May's figure was revised up from 139,000 to 144,000. Even the ISM Services PMI exceeded expectations—50.8 versus the projected 50.5. Thus, bears had a full carte blanche yesterday, which they failed to use—largely because numerous factors related to Donald Trump's policies continue to weigh on the U.S. currency.
On the 4-hour chart, the pair consolidated above the 1.1680 level and continues to rise toward the next Fibonacci retracement level of 161.8% at 1.1851. A rebound from the 1.1851 level would favor the U.S. dollar and signal a possible decline within the upward trend channel. A close above 1.1851 would increase the probability of continued growth toward the next resistance level at 1.2066. The RSI indicator is showing signs of a potential bearish divergence.
Commitments of Traders (COT) Report:
During the latest reporting week, professional traders opened 2,980 long positions and closed 6,602 short positions. The sentiment of the "Non-commercial" group remains bullish—largely due to Donald Trump—and continues to strengthen. The total number of long positions held by speculators now stands at 224,000, while short positions total 112,000, with the gap steadily widening. In other words, demand for the euro persists, while the dollar remains under pressure.
For twenty-one consecutive weeks, large players have been cutting short positions and increasing longs. Although the ECB–Fed monetary policy gap is still significant, Donald Trump's political decisions are viewed by traders as a more influential factor—potentially causing a U.S. economic recession and other long-term structural issues for America.
News calendar for the U.S. and Eurozone:
Eurozone – Speech by ECB President Christine Lagarde (07:30 UTC).
On July 4, the economic calendar contains only one notable entry. The influence of news flow on market sentiment may be very limited today, especially as the U.S. celebrates Independence Day.
EUR/USD forecast and trader tips:
I would consider selling the pair today if it rebounds from the 1.1802 level on the hourly chart, with a target of 1.1712. I previously recommended buying at the rebound from 1.1454, targeting 1.1574, 1.1645, 1.1712, and 1.1802—all of which have been reached. New long positions could be considered upon a close above 1.1802, targeting 1.1888.
The Fibonacci levels are plotted from 1.1574 to 1.1066 on the hourly chart and from 1.1214 to 1.0179 on the 4-hour chart.
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