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On Tuesday, the EUR/USD pair continued its growth and, by the end of the day, was above the corrective level of 61.8% (1.0917), which suggests further growth. However, this morning, there was a reversal in favor of the US currency, closing below the level of 1.0917, suggesting a potential continuation of a decline towards the levels of 1.0864 and 1.0810.
Over the past few days, the patterns have shifted, indicating a "bullish" trend. The rise in the European currency over the past two days was solely due to weak statistics from the US. There were no other reasons for the euro to grow; as of Monday, there was still a "bearish" trend. Thus, bulls currently dominate the market, but their high status is purely based on the information background. They might quickly retreat if today's and tomorrow's news are weak.
On Tuesday, I believe, only one report was noteworthy – the number of job openings in July in the US. It came in below traders' expectations, leading to a retreat of dollar buyers from the market. The demand for the dollar decreased; against this backdrop, the euro rose in value. Yesterday, there were also disappointing data from the US. The GDP grew weaker than expected, and the ADP report showed fewer jobs than traders anticipated. Consequently, the dollar was under deserved market pressure. However, it's gaining today, even though this morning's news only came from Germany, where retail sales decreased more than expected, and unemployment claims surpassed forecasts. More significant reports are yet to come.
On the 4-hour chart, the pair has consolidated above the descending trend corridor, which greatly concerns me. The trend has turned "bullish," but I would not rush to conclusions. The decline could resume this week or next, but we need to await further clarification and refinement of the 4-hour chart.
Commitments of Traders (COT) Report:
During the last reporting week, speculators opened 6,925 long contracts and 8,028 short contracts. The sentiment of major traders remains "bullish" and isn't significantly weakening. The total number of long contracts speculators hold now stands at 239,000, and short contracts at 80,000. The situation will change in the opposite direction over time, but bearish traders aren't pressing the bulls too hard now. The high value of open Long contracts suggests that buyers might close them soon – there's a strong bias towards bulls. The current figures allow for continuing the euro's decline in the coming weeks. The ECB is increasingly signaling the end of the QE tightening procedure.
News calendar for the US and the European Union:
European Union - Consumer Price Index (CPI) (09:00 UTC).
European Union - Unemployment Rate (09:00 UTC).
European Union - Publication of the ECB's monetary policy meeting minutes (11:30 UTC).
USA - Core Personal Consumption Expenditure Price Index (12:30 UTC).
USA - Number of initial unemployment benefit claims (12:30 UTC).
USA - Personal income and expenditures (12:30 UTC).
The economic events calendar for August 31st features six rather significant entries, all of which still need to be released. The influence of the news background on traders' sentiment throughout the day could be quite strong.
Forecast for EUR/USD and advice to traders:
Sales could have been initiated upon closing below 1.0917 on the hourly chart, with targets at 1.0864 and 1.0810. You can also sell upon closing below 1.0864. Purchases are possible upon a rebound from the 1.0864 level, aiming for 1.0917. Or upon a rebound from 1.0810.
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