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The EUR/USD pair continued to decline on Wednesday and consolidated below the 76.4% Fibonacci level at 1.1416. Thus, the decline in the euro may continue today toward the next retracement level of 100.0% at 1.1325. Consolidation above 1.1416 would favor the euro and some upward movement toward the 61.8% retracement level at 1.1473.
The wave situation on the hourly chart remains bearish. The latest completed upward wave failed to break the previous peak, while the latest downward wave broke the previous low and has continued forming for three weeks. Traders expect at least one more FOMC policy tightening before the end of the year and another one next year. This factor continues to provide strong support for the US currency.
The news background on Wednesday allowed the bears to launch a counterattack, but they did not even attempt to do so. The business activity indices for Germany and the European Union, published in the morning, showed that the European economy is growing gradually, which could have been interpreted as favorable for the euro. However, as all traders have already realized, the market is currently focused solely on FOMC policy tightening. This week, several FOMC members stated that inflation in the US remains too high, meaning that another rate hike may be required in the future. However, far from all Fed policymakers are openly talking about one or even two additional rounds of tightening. I would even say the opposite. The Fed is prepared to take hawkish measures if inflation fails to show signs of slowing, but at the same time, no one is currently announcing a rate hike before the end of the year or next year. In my view, even the Fed's hawkish stance at this point cannot serve as a basis for the US dollar to rise every day. I do not believe that Fed policymakers will inevitably raise the interest rate more than once. And one rate hike is too little and certainly does not justify such a strong wave of dollar buying.
On the 4-hour chart, the pair consolidated below the 23.6% Fibonacci level at 1.1449. Thus, the decline in the euro may continue toward the next retracement level of 0.0% at 1.1325. A close above 1.1449 would allow for some upward movement toward the 38.2% Fibonacci level at 1.1526. A bullish divergence is developing on the CCI indicator, which could stop the bears' attacks.
Commitments of Traders (COT) Report:
During the latest reporting week, professional traders opened 10,491 Long positions and closed 5,132 Short positions. Over the seven weeks in February and March, the bulls' overwhelming advantage disappeared because of the war in Iran, while over the past 25 weeks, the situation has become more balanced amid market expectations that the conflict will end. The total number of Long positions held by speculators currently stands at 209,000, compared with 235,000 Short positions. The bears remain in the lead, but their advantage is narrowing.
Overall, over the long term, major market participants continue to show strong interest in the euro. Of course, events of various kinds around the world, which have been abundant in recent years, influence investor sentiment. In particular, the market is currently keeping a close eye on the situation in the Middle East, where the war repeatedly appears to end and then resumes. However, geopolitics no longer determines the dollar's direction on its own.
News Calendar for the US and European Union:
The September 24 economic calendar contains three events, none of which I consider significant. The impact of the economic background on market sentiment on Thursday will be extremely weak or absent.
EUR/USD Forecast and Trading Tips:
Buying the pair is possible today if it closes above 1.1416 on the hourly chart, with targets at 1.1473 and 1.1519. Selling opportunities were available after consolidation below 1.1473, with targets at 1.1416 and 1.1325.
The Fibonacci grids are drawn from 1.1325 to 1.1712 on the hourly chart and from 1.1849 to 1.1325 on the 4-hour chart.
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