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The EUR/USD pair has been declining for the tenth consecutive day. At present, quotes remain within the "bullish" imbalance 9, which still allows for an eventual reaction from this pattern. Despite the persistence of the decline, it is very weak. It is clear that the bulls have run out of fuel, while the bears have not yet refueled either, leaving price action sluggish in either direction. One might assume that Friday's US labor market and unemployment data could shift trader sentiment, but I would not count on it too much. Even this week, there have been plenty of important events and reports, yet movements in the Forex market remain largely symbolic.
Therefore, I continue to wait for a bullish reaction from imbalance 9 until the invalidation of this pattern forces a conclusion that the bullish impulse has been canceled. This would not turn the trend bearish, but it could allow the bears to seize the initiative for a while. Thus, only the bulls themselves can save the situation—and they need to do so as quickly as possible, ideally this week. If the bulls manage to restore the euro's positions, the reaction to imbalance 9 could then be considered double.
Two weeks ago, there was a liquidity sweep of the swing from December 16, after which the euro's decline began. The pair's fall may end this week, as bullish imbalance 9 is still a support zone for price. The news background for the dollar this week has been very challenging, with most economic data not in its favor. Nevertheless, the bulls continue to idle.
The chart picture continues to signal bullish dominance. The bullish trend remains intact, but at the moment traders need new signals. Such a signal can only be formed within imbalance 9. If bearish patterns appear or bullish ones are invalidated, the trading strategy will have to be adjusted. For now, however, there are no grounds for this.
The news background on Thursday was virtually absent. The unemployment rate in the EU unexpectedly declined, but this did little to support the euro. Producer prices rose by 0.5%, yet even in this case the bulls failed to go on the offensive. US initial jobless claims for the first week of January came in line with traders' expectations.
The bulls have had plenty of reasons for a renewed advance for the past three months, and all of them remain relevant. These include the (in any case) dovish outlook for FOMC monetary policy, Donald Trump's overall policy (which has not changed recently), the US–China confrontation (where only a temporary truce has been reached), protests by the American public against Trump under the "No kings" banner, weakness in the labor market, the bleak prospects for the US economy (recession), and the government shutdown (which lasted a month and a half but was clearly not priced in by traders). Thus, further growth of the pair, in my view, would be entirely natural.
One should also not lose sight of Trump's trade war and his pressure on the FOMC. Recently, new tariffs have been introduced less frequently, and Trump himself has stopped criticizing the Fed. However, I personally believe this is just another "temporary calm." In recent months, the FOMC has been easing monetary policy, which is why there has been no new wave of criticism from Trump. But this does not mean these factors no longer pose problems for the dollar.
I still do not believe in a bearish trend. The news background remains extremely difficult to interpret in favor of the dollar, which is why I do not attempt to do so. The blue line marks the price level below which the bullish trend could be considered complete. Bears would need to push the price down about 300 points to reach it, and I consider this task unrealistic under the current news background and circumstances. The nearest upward target for the European currency remains the "bearish" imbalance at 1.1976–1.2092 on the weekly chart, which was formed back in June 2021.
News calendar for the US and the European Union:
On January 9, the economic calendar contains seven events, two of which can be considered extremely important. The impact of the news flow on market sentiment on Friday may be strong in the second half of the day.
EUR/USD forecast and trader advice:
In my view, the pair may be in the final stage of a bullish trend. Despite the fact that the news background remains on the bulls' side, bears have attacked more often in recent months. Still, I see no realistic reasons for the start of a bearish trend.
From imbalances 1, 2, 4, and 5, traders had opportunities to buy the euro. In all cases, we saw some growth. Opportunities to open new trend-following long positions also appeared after a reaction to bullish imbalance 3, then after a reaction to imbalance 8, and later after the bounce from imbalance 9. This week, a second reaction to bullish imbalance 9 may occur. The target for euro growth remains the 1.1976 level. New long positions are acceptable if a new bullish signal is formed. If not, the long strategy will have to be reconsidered.
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