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On Thursday, the EUR/USD pair rebounded from the 38.2% corrective level at 1.1666, reversed in favor of the euro, and rose almost to the 50.0% Fibonacci level at 1.1745. A rebound from the 1.1745 level today will favor the US dollar and a resumption of the decline toward 1.1666. Consolidation above 1.1745 will increase the likelihood of further growth toward the 61.8% corrective level at 1.1824.
The wave situation on the hourly chart currently raises no questions. The last completed upward wave did not break the previous peak, while the last downward wave broke the previous low by only a few pips. A temporary truce between Iran and the United States supported the bulls, allowing them to form a strong upward wave. However, now, three weeks later, it can be said that geopolitics is once again moving in an undesirable direction. According to some reports, Donald Trump is ready for a prolonged blockade of the Strait of Hormuz, which would effectively end negotiations and peace between Iran and the United States. Bears are regaining confidence.
On Thursday, there was a large amount of economic data released in both Europe and the United States, but I would like to highlight three events. First, the European economy grew by only 0.1% quarter-over-quarter and 0.8% year-over-year in the first quarter. Second, inflation accelerated to 3%, exceeding forecasts. Third, the ECB left its monetary policy parameters unchanged but signaled the possibility of tightening in the future. Together, these three factors allowed the euro to show growth, but the continuation of this growth remains uncertain. The European economy is slowing, and its growth rates have been modest in recent years. Inflation is accelerating, which will require tighter monetary policy, but at the same time, the ECB will delay rate hikes as long as possible, as they would further slow the economy. The next central bank meeting will take place in June, and by that time, two more inflation reports will be released, allowing an assessment of the scale of the problem. Inflation is rising and will continue to rise not only in the EU.
On the 4-hour chart, the pair reversed in favor of the US dollar and began declining toward the 76.4% corrective level at 1.1617. In my opinion, the hourly chart is currently more informative due to weak price movements. Bulls seized the initiative in the market about a month ago but are now searching for new growth drivers. No emerging divergences are observed today on any indicator.
Commitments of Traders (COT) Report:
During the last reporting week, professional traders opened 2,768 long positions and closed 12,538 short positions. Over seven weeks, the overall advantage of the bulls has disappeared, but the past two weeks indicate that bulls have returned to the offensive. The total number of long positions held by speculators now stands at 217,000, while short positions total 176,000. The gap is widening again in favor of the euro.
Overall, in the long term, major players continue to show strong interest in the euro. Of course, various global events—of which there has been no shortage in recent years—affect investor sentiment. In particular, market attention remains focused on the Middle East, where the war has only been paused, not ended. Thus, in the near term, the euro and dollar exchange rates will depend not on the monetary policy of the Fed or the ECB, nor on economic data, but on the situation in Iran.
Economic Calendar for the US and the EU:
On May 1, the economic calendar contains one fairly important entry. The impact of the news background on market sentiment on Friday may appear in the second half of the day but is likely to remain weak.
EUR/USD Forecast and Trading Tips:
Selling the pair is possible today if there is a rebound from the 1.1745 level on the hourly chart, targeting 1.1666. I previously recommended buying on a rebound from 1.1666 with a target of 1.1745. The target has almost been reached. New buy positions are recommended after a close above 1.1745, targeting 1.1824.
Fibonacci levels are constructed from 1.2082 to 1.1410 on the hourly chart and from 1.1474 to 1.2082 on the 4-hour chart.
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